U.S. Treasury Debt Announcement Signals to Some That June 1 Isn’t an ‘X Date’

May 25 (Reuters) – The U.S. Treasury on Thursday announced a pair of Treasury bill auctions for early next week, which some market participants saw as an indication that the so-called ” date X” of the debt ceiling might not actually be June 1.

The Treasury’s Bureau of Fiscal Management said it would auction $119 billion worth of 3- and 6-month bills on Tuesday, with sales officially settling two days later on June 1. deadline for the cash-strapped government to cover all of its obligations unless a deal is reached between the White House and congressional Republicans to lift the $31.4 billion US debt ceiling.

According to research firm Wrightson ICAP, the office typically does not announce an upcoming sale “until it is certain it has room under the debt ceiling for new securities.”

Gennadiy Goldberg, senior rates strategist at TD Securities in New York, said the fact that the Treasury made the announcements on Thursday “suggests that the Treasury likely has cash to settle the stock. They have suggested in the past that they wouldn’t advertise auctions they didn’t believe they could afford to settle in. So I think that’s a positive note.

“But,” Goldberg continued, “that’s really where the positivity ends because we really know that it’s very likely that in the first two weeks of June the Treasury will run out of money.”

The Treasury is “already scratching the bottom of the barrel” in terms of its cash balance, he said.

Despite Yellen’s remarks that Date X could be as early as June 1, most Wall Street firms believe the date the Treasury will finally run out of room under the extraordinary measures it has employed for decades. month to expand its borrowing capacity is most likely between June 6 and June 9.

On Monday, the government’s cash balance was $68.34 billion, down from $60.66 billion on Friday, but down from $87.43 billion the previous week.

But June 1 is the date on which some $117 billion of Treasury bills mature. With so much uncertainty in the market about date X, the yield on this issue had climbed to an all-time high above 7% on Wednesday. It fell on Thursday after the announcement of the Treasury auction for bills due June 1 and as debt ceiling negotiations showed signs of progress, and last yielded 5, 89%.

With the issue growing more urgent by the day, talks between the Biden administration and Republicans in the U.S. House of Representatives have shown progress and the outlines of a deal may be taking shape, Reuters reported on Thursday. The two sides are only separated by $70 billion out of a total figure believed to be well over $1 trillion, according to a source. (Reporting by Dan Burns and Karen Brettell; editing by Paul Simao)