Halister News

(Bloomberg) -- Since the debt ceiling is likely to limit Treasury’s borrowing for the remainder of FY17, coupon sizes may be unchanged throughout the quarter and there will be no word on any new ultra-long product, Jefferies economists Ward McCarthy and Thomas Simons say in note.

• When the debt ceiling is a “binding constraint” on issuance, Treasury tends to rely on bills for financing in order to have flexibility in maintaining “reasonable cash balances”
• Treasury won’t announce a new issue when it’s “tight up against the debt ceiling”
  • Expect no comments about new maturities in the refunding statement and comments during the press conference “will be non-committal”
• Similar to last quarter, Treasury projections “reflect anticipated distortions from the debt ceiling”
  • Treasury would normally be making paydowns in 2Q, but the debt ceiling prevented it from borrowing as much as it would’ve in 1Q “and as a consequence some of the borrowing spilled into 2Q”