The U.S. Treasury warned that it was still on schedule to reach its debt limit close to the end of the year, even though it was taking measures that would allow it to continue borrowing funds through early 2013. It also plans to sell $72 billion in notes and bonds in next week’s refunding exercise.
The Treasury was $235 billion below the $16.4 trillion debt limit as of Monday. While the department did not say when its emergency borrowing tools are likely to run out as well, economic experts have earlier forecast the latter half of February as the deadline. Raising the debt ceiling will be a big challenge for the Congress once the presidential election, set for November 6, is over. Doing so will also likely have an effect on the fiscal cliff, the more than $600 billion in federal spending cuts and tax increases set to take effect at the start of next year.
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U.S. Federal Reserve chairman Ben Bernanke and International Monetary Fund chief Christine Lagarde have warned about the negative effects for the domestic as well as world economy if the debt limit is not raised.
“Extraordinary measures are temporary in nature and not a solution,” Jefferies Group economist Thomas Simons told Bloomberg. “Considering the debt ceiling is going to be tied into the fiscal cliff discussions there is a risk that we end up with another debt ceiling scenario like last year.”
The Treasury also announced a $72 billion funding of its debt securities next week in order to raise $8.9 billion in new cash for the quarter. It will auction $32 billion in three-year notes next Tuesday, $24 billion in 10-year notes on Wednesday, and $16 billion in 30-year bonds on Thursday. While this quarter’s remaining $288 billion in estimated government financing requirements will be met by weekly bill auctions, the department may also issue cash management bills.