Halister News

(Bloomberg) -- The suspension of the debt limit to only December will probably slow Treasury’s pace of increasing coupon auction sizes to offset the drop in demand from the Fed as it begins to wind down its balance sheet, Wrightson ICAP chief economist Lou Crandall says in a note.

• Wrightson forecasts across-the-board increases of $1b in all coupon auction sizes starting in November
• That is “a slightly less aggressive pattern than in our previous projections, which assumed the Treasury would boost the four monthly notes by a total of $2 billion apiece over the course of November and December, but would increase the 10- and 30-year offerings by only $1 billion for the quarter as a whole”
• 3-month suspension also hinders Treasury from dramatically boosting bill supply in Q4
• Treasury’s August refunding statement anticipating bill sector increases followed by bigger nominal coupon auctions was based on assumption that a “more permanent debt ceiling fix would be in place by autumn,” allowing cash balance to rise to $360b by Dec. 31
  • Year-end cash balance of $200b-$225b “now seems more realistic”

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton