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Investing.com - The U.S. Treasury Department on Friday asked primary dealers for feedback on rebuilding its cash balance following the recent debt ceiling increase, and how many Treasury bills it could issue without market disruption.
The survey was conducted as part of Treasury’s standard procedure ahead of its quarterly refunding announcement expected later this month. Treasury specifically asked dealers about factors to consider when determining Treasury bill issuance to gradually rebuild the cash balance to levels consistent with its policy.
U.S. Congress passed a tax and spending bill last week that is projected to add trillions in debt over the coming decade and increase the debt ceiling by $5 trillion. Treasury announced Tuesday it plans to build its cash balance to $500 billion by the end of July through increased Treasury bill issuance.
The Treasury Department also requested dealers to estimate the market’s capacity to absorb additional bill issuance on monthly and quarterly bases "that would not cause significant price deviations in Treasury bills relative to fair value." Treasury is expected to increase its sales of bills, which mature in one year or less, as it faces a worsening budget deficit.
Treasury Secretary Scott Bessent has indicated he does not anticipate increasing auction sizes of longer-dated debt at current interest rates, leading banks to assume Treasury will continue relying more heavily on bills to finance operations. The department also sought feedback on potential enhancements to its Treasury buyback program, used for both cash management and liquidity support.
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