Treasury to Sell Record Amount of Bills as Debt Pact Expires
The U.S. Treasury Department will auction a record amount of three- and six-month bills next week, giving it greater flexibility after tomorrow’s expiration of an agreement that suspended the nation’s debt limit.
The U.S. will sell $42 billion in three-month bills and $42 billion in six-month securities at its weekly auction on Feb. 10. The three-month offering is $14 billion more than the previous week, while the six-month is $22 billion higher. Treasury will also auction $50 billion of 72-day cash-management bills the same day.
Congress and President Barack Obama agreed in October to suspend the debt limit until tomorrow as part of an agreement to end a 16-day partial government shutdown. Under the agreement, Treasury was effectively required not to have a cash balance as of tomorrow that exceeded the balance on the date of the pact, according to Stone & McCarthy Research Associates. Treasury is now free to issue as much debt as it wants until extraordinary measures used to create room until the limit are exhausted.
“The rule forced them into a position where their cash balances are smaller at a time when they have to pay out a lot in tax returns,” said Thomas Simons, a government-debt economist in New York at Jefferies LLC, one of 21 primary dealers that are required to bid at Treasury auctions. “The Treasury has a significant need for cash. Its prudent planning to have a lot of cash on hand.”
Rates Rise
Secretary Jacob J. Lew said that the U.S. expects to run out of borrowing capacity by the end of February. The Treasury uses so-called extraordinary measures, or accounting maneuvers, to stay under the ceiling. Lew said some measures that the Treasury has previously used to remain under the debt limit aren’t available this time.
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http://www.bloomberg.com/news/2014-02-06/treasury-to-sell-record-amount-of-bills-as-debt-pact-expires.html
