Reuters’ interpretation of the U.S. debt ceiling increase to the bond market

Translated by: MOS Translation Team – LaoSan

U.S. debt ceiling increases

According to a Reuters New York report on October 12th, the U.S. Senate approved the debt ceiling bill, an increase of US$480 billion to US$28.9 trillion. The House of Representatives will vote for the bill on Tuesday, and President Biden will sign it into law. This bill will cover the financial needs until early December and left the long-term solution to be decided later. Investors are still concerned about the risk of debt default before the December deadline.

The U.S. Treasury Department expects to quickly spend approximately two-thirds of the newly authorized $480 billion fund. Wrightson Capital, a money market research company, stated that according to the law, the Ministry of Finance must first make up the balance of trust funds that have been canceled during the “suspended debt issuance period” (DISP). As of October 6th, the government trust fund was owed 301 billion U.S. dollars in non-market securities, which means that the Treasury Department’s disposable regular amount was less than 200 billion U.S. dollars. It’s expected to run out in the first week of November and has to announce a new The “suspended debt issuance period.”

Bank of America Securities Co., Ltd. predicts that the new funds may cover debt needs from December to February. After the Treasury bill is signed into law,  it will issue more than 300 billion U.S. dollars.

Due to the postponement, the risk of short-term U.S. debt default has been eased at the present stage. Last Friday, the transaction price was 14.9 basis points, while it had soared to 28 basis points before.

Although the yields on U.S. bonds maturing in late October fell, the pressure will shift to bonds maturing in early December.

Proofread by: Wenfei

Edited by: Wenfei

Posted by: Wenfei


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