Treasury seeks dealer input on market capacity for T-bill issuance

The U.S. Treasury Department on Friday asked primary dealers for input regarding how it should rebuild its cash balance following the increase in the debt ceiling, and how many Treasury bills it could issue without disrupting the market.

The survey was part of Treasury’s normal procedure ahead of its quarterly refunding announcement, which is next due later this month.

U.S. Congress last week passed a tax and spending bill that increases the debt ceiling by $5 trillion. Treasury said on Tuesday it will build its cash balance to $500 billion by the end of July by increasing its issuance of Treasury bills.

In Friday’s survey the Treasury asked banks “what factors should Treasury consider when determining Treasury bill issuance to gradually rebuild the cash balance over time to a level more consistent with its cash balance policy?”

It further asked dealers to estimate the market’s capacity to absorb additional bill issuance on a monthly and quarterly basis, “that would not cause significant price deviations in Treasury bills relative to fair value.”

The Treasury also sought dealer feedback on how it may enhance its Treasury buyback program, which is used for both cash management and liquidity support purposes.