What Comes After the Debt Ceiling Debacle? Opportunity.

Treasury Cash Reserves T-Bill Issuance Have Room to Rise

The standoff between the White House and Congress over raising the US debt ceiling has been the talk of the town for months. Now that the government has reached an agreement, savvy investors will be on the hunt for opportunities—and we think there will be some attractive ones.

After breaching the $31.4 trillion statutory debt ceiling in January, the US Department of the Treasury resorted to “extraordinary measures” to meet its obligations and keep the federal government solvent. That has meant running its Treasury General Account—essentially the government’s checking account—in a tight range and aggressively issuing and paying down T-bills, depending on short-term cash needs.

But the House of Representatives on Wednesday voted to suspend the country’s debt ceiling for two years, and the bill is expected to win approval in the Senate and be signed into law by President Biden in short order. This would neutralize—for now—the risk of an “accidental” default. Perhaps more importantly for investors, it clears the way for the Treasury to replenish its checking account to $500 billion (Display) and make good on a backlog of delayed payments.