Halister News

(Bloomberg) -- The timing of the new debt-ceiling deadline will depend on estimating borrowing needs for 1Q, “which is always a dangerous exercise since Treasury pays out the lion’s share of tax refunds” in January and February, Jefferies economists Ward McCarthy and Thomas Simons say in note.

• Drop-dead date could come as early as February if tax refund outlays are “relatively high” and Treasury needs to issue a lot of debt to fund them
• Deadline could be as late as end-2Q or beginning of 3Q if Treasury is able to get through refund season and make it to April 15 tax receipts 
• Determining the debt ceiling deadline will depend on how Congress writes the legislation; standard operating procedure during the past few years has been to suspend the ceiling for a defined period of time
• Assuming that agreement centers on a suspension through Dec. 15, Treasury will be able to replenish the G-Fund and others, which “reloads the extraordinary measures” for when the limit is hit again in mid-December; Treasury will ramp up bill issuance, and it will have to have the same cash on hand in December as it did upon the passage of the bill
  • “No matter how many bills are issued in September, October and November, Treasury will have to make potentially massive paydowns”

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang