The US Treasury has not changed its debt issuance strategy or calendar due to the May 16 deadline for Congress to raise the US borrowing limit, a Treasury official said on Friday.
The official, speaking on condition of anonymity, added that increased issuance of short-term Treasury bills could help ease demand pressures in money markets, but the US finance ministry is not in a position to add to bill auctions due to the constraints of the $14.3 trillion debt ceiling.
The Treasury has urged Congress to lift the debt ceiling, but it has not requested a specific amount of increase, the official said, adding that the size was up to lawmakers.
The Treasury estimates that it will reach the ceiling on May 16, but it can take additional extraordinary measures to allow borrowing to continue until about July 8.
The Treasury in its quarterly refunding survey asked its primary bond dealers to comment on conditions in the money markets. Demand for short-term securities has increased since the Federal Deposit Insurance Corp took steps to force banks to bring back into these markets the cash that had been held as excess reserves at Federal Reserve banks.
This has sucked up available securities, forcing down rates on collateral such as Treasury bills. One possible remedy could be increased bill issuance, the official said.
The survey also asked for their opinions on the Treasury's borrowing needs and fiscal forecasts through the end of fiscal 2012. "Do you believe the current financing schedule is well suited to meet Treasury's financing needs through the end of FY 2012?," the survey asked.
The survey also asked dealers to comment on liquidity conditions in the Treasury STRIPS market, which allows interest coupons to be stripped from Treasury notes and bonds and trade separately.
The 20 primary dealers meet to discuss debt markets with Treasury officials on April 29 in Washington. The Treasury is scheduled to reveal its quarterly borrowing estimates on May 2 and will announce refunding plans for 3- 10- and 30-year debt securities on May 4.