By Gertrude Chavez-Dreyfuss
Boston (Reuters) -The bond market cracks for up to $ 1 trillion additional treasures in the US in the second half of the year once legislators address the upcoming debt ceiling problem, possibly permanent, say highest rate strategists on Tuesday.
Any new announcement is likely to focus on shorter debt including bills.
With the floods of treasures, market participants are left to marvel: who's going to buy them all? The announcement of the Treasury is due to tackle the massive deficit of the US Government.
President Donald Trump's sweeping tax cutting bill would lead to increased increase than expected $ 2.8 trillion in the federal deficit over the decade, despite a boost to the US economic output, a Congressional Nonpartisan budget office projected.
The United States Parliament could vote on Friday on the Republican Tax and Expenditure Bill, said Treasury Secretary Scott Bessent on Tuesday, and was confident that the house would then pass that version.
“We are about to go through a flat shift,” said Mark Cabana, Head of the U.S. Strategy Strategy at Bofa Securities, during Tuesday's panel discussion at the Cash Fund symposium in Boston. “You're going to see this big publishing clip and it's coming within the next few months. You can argue just when they raise the debt limit, but the X-day is coming soon.”
Bessent had said that the so-called x-dates when the government would evacuate remaining borrowing capacity under the federal debt ceiling would come sometime during the mid-summer to the end. When the debt ceiling is reached, the Treasury cannot increase loans, but if raised or eliminated, the government can then announce more debt.
Cabana forecast is for a new supply of treasures to hit $ 1 trillion by the end of the year. Genadiy Goldberg, Head of the US Rates Strategy at TD Securities, is also expecting an increase of nearly $ 1 trillion in its announcement this year, with around $ 700 billion supply in August and September.
A surge in the supply of the Treasury could increase the repurchase of rates, or repo rates, which refers to the cost of short -term cash borrowing using other treasures or debt guarantees as parallel. The higher supply of the Treasury is usually saturated the market with an additional parallel, which can initially reduce repo rates due to excessive supply. However, if the supply exceeds demand significantly, it could lead to higher repo rates as lenders demand more compensation for holding more warranties.
Goldberg believes that this year's supply will be focused on the front end of the Treasury curve-the two years for the seven-year sector.