U.S. Will Hit Borrowing Cap Near Year-End, Treasury Says

U.S. Will Hit Borrowing Cap Near Year-End, Treasury Says

The Treasury Department said Wednesday that it continues to expect to reach the debt limit near the end of the year.

With extraordinary measures, the government will not default on the nation’s debt obligations until early in 2013, the department said. The debt ceiling is now $16.4 trillion.

Raising the debt ceiling is another challenge facing Congress after the presidential election. The divisive politics of raising the limit may complicate negotiations over the so-called fiscal cliff, the tax hikes and spending cuts set to take place at the start of the year.

With the presidential election one week away, Treasury officials made no changes to their debt management plans.

The department gave no guidance on contingency plans for debt issuance next year depending on how the fiscal cliff is averted.

“Going forward, Treasury will continue to provide guidance to market participants regarding any changes in the fiscal outlook that might affect the government’s financing needs,” the department said.

Treasury said it expects the first floating-rate auction to be at least one year away.

It said no decision had been made about allowing negative rates at bill auctions.

The comments came as the Treasury announced it would sell $72 billion in notes and bonds next week in its quarterly refunding auctions.

Treasury has held the refunding size steady for two years.

The department will auction $32 billion in 3-year notes next Tuesday, $24 billion in 10-year notes on Wednesday and $16 billion in 30-year bonds on Thursday.

The auction will refund $63.1 billion in maturing securities and will raise $8.9 billion.

The rest of the government’s estimated $288 billion financing requirements in the quarter will be met by weekly bill auctions, monthly note and bond auctions, and auctions of Treasury inflation-protected securities or TIPS. The department may also issue cash management bills during the quarter.

Source: MarketWatch