I'm not sure if I understood correctly: Bessent is going to continue issuing short term bills and drawing from the TGA until the debt ceiling is lifted right?
Bessent will issue positive net new bills for a few weeks until he exhausts the additional borrowing headroom provided by the extraordinary measures. From that point net bill issuance will turn negative to make room under the debt ceiling for the net positive coupon issuance.
TGA will start drawing down then as well since total debt issuance (bills + coupons) will be net flat at that point to stay at the ceiling. TGA will draw down (save for spikes up in mid April and June because of tax receipt inflows) then through the X-date.
The TGA levels Spreadsheet from my X-date post on Sunday provide what the TGA levels for each day will be roughly be through August X-date (or until the ceiling is lifted/suspended again in which case Treasury will rebuild it with large net positive bill issuance). Ill update those with more granular intra month handling of govt trust funds soon.
Thanks! And do you know why is it that drawing down the TGA is more accommodating for risk assets than exhausting the extraordinary measures? Is it because these measures move around money whereas the TGA actually introduces liquidity?
the extaoridnary measures just provide Treasury additional borrowing headroom. So think of it as bonus borrowing room above the debt ceiling level. Using them has no impact on liquidity vs. what Treasury would otherwise be doing if there was no debt ceiling. When Treasury has to "fund" the deficit by drawing down the TGA because they have hit the cap of debt ceiling + EM headroom, those reserves will end up either as bank reserves or as increased RRP as the TGA decreases, liquidity by some folks measure and theoretically beneficial for risk assets
I'm not sure if I understood correctly: Bessent is going to continue issuing short term bills and drawing from the TGA until the debt ceiling is lifted right?
Bessent will issue positive net new bills for a few weeks until he exhausts the additional borrowing headroom provided by the extraordinary measures. From that point net bill issuance will turn negative to make room under the debt ceiling for the net positive coupon issuance.
TGA will start drawing down then as well since total debt issuance (bills + coupons) will be net flat at that point to stay at the ceiling. TGA will draw down (save for spikes up in mid April and June because of tax receipt inflows) then through the X-date.
The TGA levels Spreadsheet from my X-date post on Sunday provide what the TGA levels for each day will be roughly be through August X-date (or until the ceiling is lifted/suspended again in which case Treasury will rebuild it with large net positive bill issuance). Ill update those with more granular intra month handling of govt trust funds soon.
Thanks! And do you know why is it that drawing down the TGA is more accommodating for risk assets than exhausting the extraordinary measures? Is it because these measures move around money whereas the TGA actually introduces liquidity?
the extaoridnary measures just provide Treasury additional borrowing headroom. So think of it as bonus borrowing room above the debt ceiling level. Using them has no impact on liquidity vs. what Treasury would otherwise be doing if there was no debt ceiling. When Treasury has to "fund" the deficit by drawing down the TGA because they have hit the cap of debt ceiling + EM headroom, those reserves will end up either as bank reserves or as increased RRP as the TGA decreases, liquidity by some folks measure and theoretically beneficial for risk assets
I see, thank you for clarifying it!
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