Treasury to cut back lending to Fed for emergency lending to avoid debt limit

The US government is beginning to maneuver to avoid hitting the Federal debt ceiling, probably sometime in the second quarter.

Beginning February 3, it will shrink the amount of money it has on deposit at the Fed for emergency lending programs. The amount will shrink form $200 bln to $5 bln.

My initial reaction is that this will be a net positive. The market will view it as a panic move in the near-term to save cash, but it is also likely no longer needed given the relative economic stability of the last year.