The United States Senate followed the House of Representatives and voted in favor of the bill seeking to suspend the debt ceiling until January 1, 2025, preventing thus the country’s first-ever default. The bill received 63 votes in favor and 36 against. Out of the latter, 31 came from Republican Senators, four from the Democrats, and one from Vermont’s Bernie Sanders, who is an independent. When it comes to votes in favor, 45 came from the Democrats, 16 from the Republicans, and two from independent senators. Tennesee Senator Bill Hagerty was absent from the vote. It will now head to President Joe Biden, who will sign it and convert it into a law.
The Treasury Department will issue $700 billion in T-bills within weeks of a debt-ceiling deal, draining liquidity from markets
- The Treasury will have to replenish its cash after the debt ceiling is lifted, Goldman Sachs said.
- Selling up to $700 billion in T-bills to rebuild its coffers withing six to eight weeks of a debt deal.
- Draining liquidity out of markets in a short period of time.
The Treasury Department will issue $600 billion-$700 billion in T-bills weeks after lawmakers agree to lift the debt ceiling, Goldman Sachs estimated. President Joe Biden and Republicans in Congress have reached a deal. Goldman expects the Treasury to flood the market with T-bills, restoring its cash balance to $550 billion within six to eight weeks of the deal. On Friday, the Treasury General Account was $60.7 billion, down from $140 billion just a week prior. Overall, Goldman expects the Treasury will supply the market with more than $1 trillion of T-bills on a net basis this year.
That will pull liquidity out of financial markets. In a separate note, analysts at Bank of America recently said that would have an equivalent impact on the economy as a Federal Reserve rate hike of 25 basis points.
That comes as the banking sector is still grappling with the fallout of Silicon Valley Bank’s collapse, which led to deposits fleeing regional banks. Meanwhile, more than a year of Fed rate hikes has also drawn money from bank accounts and into higher-yielding money market funds. Goldman estimated that bank reserves would drop by $400 billion-$500 billion due to the Treasury rebuilding its cash balance, continued deposit outflows, and the Fed’s ongoing quantitative tightening program. The Treasury Department will immediately issue $170 billion in T-bills before its cash balance shrinks further. NN BlaskMask Blog:
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