The Treasury Department could issue $1[ads1].6 trillion in notes throughout the year, Deutsche Bank said.
This is what it looks like to rebuild the cash balance after the debt ceiling crisis.
On Friday, just before the debt limit bill was signed, the balance was just $23.4 billion.
The suspension of the US debt limit has cleared the way for the Treasury Department to fill its coffers, and a tsunami of borrowing is expected in the coming months.
Congress passed a debt ceiling bill last week, and President Joe Biden signed it over the weekend. Analysts at Deutsche Bank estimated in a note Thursday that $1.3 trillion in T-bills will be issued during the rest of 2023, bringing the total for the full year to about $1.6 trillion.
“The Treasury General Account (TGA) has fallen to an alarming low this week, and the subsequent rebuild is likely to be one of the largest in debt limit history,” analysts wrote.
As of Friday, just before the debt limit bill was signed, cash in the TGA was just $23.4 billion, down from $140 billion in mid-May.
That’s because the Treasury relied on “extraordinary measures” to stay below the debt limit while still finding enough money to pay the US government’s bills on time.
From June to August, Deutsche Bank predicted that cumulative issuance over the three-month period could top out at $800 billion, “slightly above the median estimates of primary traders for the market’s capacity to digest the bill supply in the near term.”
By September, analysts expect the Treasury Department to have restored its cash holdings to about $600 billion.
The Treasury has already begun rebuilding its cash holdings, issuing one-day cash management bills, which fell due on Tuesday.
The department also announced plans last week to sell $65 billion in three-month bills and $58 billion in six-month bills on Monday and settle on Thursday.
But all the treasury bills will suck up liquidity from the financial system, potentially weighing on the markets. JPMorgan recently estimated that the combined performance of stocks and bonds this year will suffer by nearly 5% due to debt issuance and the effects of the Federal Reserve’s quantitative easing.
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