–Better Cash/Budget Positions Could Push Debt Limit Problems to March
By Joseph Plocek
WASHINGTON (MNI) – Could the slowly improving U.S. economy and the
ending of special financing factors at last be lowering the U.S.
Treasury’s borrowing needs?
The Treasury’s cash balance is running high at almost $70 billion
in total as of October 4 and the September budget — granted already in
the past — is likely to show a surplus that the Congressional Budget
Office estimates at +$75 billion.
Cash was $85.4 billion at the end of September, well above the $60
billion the Treasury had estimated in August.
Market talk is that the Treasury’s Q4 market borrowing might be
scaled back as these realities take hold. The Treasury’s preliminary
estimate was that Q4 had a $316 billion borrowing need, assuming cash at
$40 billion at end-December.
Wrightson & Associates calculates that leaving Treasury bill and
coupon issues unchanged in size will raise $295 billion in Q4 and as
such could leave the Treasury with $115 billion in cash in December,
well above target.
To be sure, CBO said that timing shifts in entitlements plus
payments to Fannie Mae and Freddie Mac aided the recent budget math.
Payments to the GSE’s are lower “because the government did not provide
cash infusions” to the entities in September and other receipts of $7
billion stemmed from the sale of AIG stock. These might be viewed as
temporary or one-time factors at a skeptical Treasury as financing
adjustments are made.
But if the Treasury scales back borrowing and cash needs, the
market might get some happy surprises.
Any debt limit problem could be pushed further off until perhaps
March from end-January, analysts say. And T-bill announcements might be
a place to start cutting down the period’s financing needs.
–email: jplocek@mni-news.com, Tel. 202-371-2121
** MNI Washington Bureau: (202)371-2121 **
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