Halister News

(Bloomberg) -- Forecast for new debt-ceiling x-date based on “highly uncertain tax flows” in early 2018 and the fact that Congress “likely will not want to play with fire,” Deutsche Bank strategist Steven Zeng said in Sept. 8 note. 

• Treasury may not need to use extraordinary measures within the first two months of the reinstatement as cash receipts tend to exceed deficit spending
• Between tax-refund season of Jan. 25 to April 15, Treasury may use as much as ~$400b of cash, boosting deficit by an est. $280b from the Dec. 9 debt-limit reinstatement; would be “dangerously close” to Treasury’s total headroom, projected at roughly $305b, including $270b-$250b in extraordinary measures
• Short-term debt-ceiling deal means year- end liquidity withdrawal may be milder than if the suspension started in October, because the seasonal ramp up in bill issuance should be slower; Treasury may opt to keep its cash balance around $150b-$200b for “easier operational management” come December, which implies smaller bill issuance
• Assuming the debt limit is reinstated Dec. 9 and Treasury resorts to extraordinary measures, increases in bill supply may be smaller due to quarterly tax payments; 4Q net bill supply est. $150b, assuming Congress doesn’t address the debt ceiling before year- end

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