NEW YORK, Sept 11 (Reuters) - Net issuance of U.S. Treasury bills could increase by $100 billion in September if the government decides to raise the T-bill auction sizes to a near historic high following a deal to extend the debt ceiling to December, BMO Capital Markets analysts said on Monday.
This could bring net T-bill supply in the third quarter to $170 billion, raising the Treasury’s cash balance to more than $100 billion.
On Sept. 7, the government had $52 billion in cash on hand.
On Friday, U.S. President Donald Trump signed a bill to raise the government’s borrowing limit from $19.9 trillion for three months and provide about $15 billion in hurricane-related aid.
Traders had feared the government may delay payments on its T-bills if the debt ceiling were not increased by the end of September. Yields on T-bills that mature in October rose on worries about a default before falling when a deal on a temporary extension was reached.
If the borrowing cap were not raised again after Dec. 8, the government could engage in a round of extraordinary measures worth $285 billion to meet its obligations, the analysts wrote in a research note.
These steps for the Treasury to conserve cash include the suspension of sales of securities to state and local governments and halting reinvestment of government securities in the federal workers’ retirement fund.
“While there is inherent uncertainty surrounding the predicting (of) spring tax season net receipts, exhaustion of extraordinary measures by March is clearly possible which should put pressure on bills expiring in March if Treasury enters into another period of extraordinary measures,” the BMO note said. (Reporting by Richard Leong; Editing by W Simon)