US Treasury Debt Announcement Signals Through June 1st Not ‘Date X’

(Reuters) – The US Treasury Department on Thursday announced a list of Treasury bill auctions early next week that some market participants see as an indication that the alleged debt ceiling may not actually be on June 1.

The Treasury Department’s Office of Public Finance Management said it will auction $119 billion in 3- and 6-month notes on Tuesday, with the sales formally settling two days later on June 1. that settle on the same day.

That is the date Treasury Secretary Janet Yellen has repeatedly pointed to as a possible deadline for a government that is short of funds to cover all of its obligations unless an agreement is reached between the White House and congressional Republicans to raise the US debt ceiling of $31.4 billion. .

According to research firm Wrightson ICAP, the bureau typically won’t announce an upcoming sale “until it’s confirmed it has space under the debt ceiling for new securities.”

The fact that the Treasury Department continued to announce Thursday “suggests that the Treasury probably has the cash to settle the securities,” said Gennadiy Goldberg, senior pricing analyst at TD Securities in New York. They have suggested in the past that they would not announce auctions that they don’t think they have the means to settle. So I think that’s a positive note.”

Goldberg continued, “This is where the positivity really stops because we know it’s very likely in the first two weeks of June that the Treasury will run out of cash.”

He said the Treasury was already “scraping the bottom of the barrel” in terms of its cash balance.

Despite Yellen’s remarks that the X date could be as early as June 1, most Wall Street firms estimate that the date the Treasury Department will finally expire under the extraordinary measures it has used for months to expand its borrowing capacity is more likely between June. June 6 and 9.

On Wednesday, the Treasury Department said the government’s cash balance was $49.47 billion Thursday afternoon, down from $76.55 billion on Tuesday, and from $68.33 billion the previous week.

But June 1 is the maturity date for the treasury bills, worth about $117 billion. With so much uncertainty in the market surrounding the X-date, yield on the issue jumped to a record above 7% on Wednesday. It tumbled on Thursday after announcing a Treasury auction for bills due to be settled on June 1. Debt ceiling negotiations also showed some signs of progress, with the latest yield at 5.79%.

Reuters reported Thursday that with the matter growing more urgent every day, talks between the Biden administration and Republicans in the US House of Representatives have shown progress and the outlines of an agreement may be taking shape. According to one of the sources, the distance between the two sides is only $70 billion, which is a total figure that far exceeds $1 trillion.

(Reporting by Dan Burns and Karen Brittle; Editing by Paul Simao and Aurora Ellis)

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