Chuyển tới nội dung
Trang chủ » Possible rewritten titles: – What’s Next for Treasury Investors After U.S. Strikes Debt Ceiling Deal? – Debt Ceiling Deal Done: What’s Ahead for Treasury Bonds and Notes? – After Debt Ceiling Accord, Here’s What Investors in Treasuries Should Watch – Debt Ceiling Agreement Reached by U.S. Government: Impact on Treasury Market – From Debt Ceiling Resolution to Treasury Investment Outlook: Key Considerations for Investors

Possible rewritten titles: – What’s Next for Treasury Investors After U.S. Strikes Debt Ceiling Deal? – Debt Ceiling Deal Done: What’s Ahead for Treasury Bonds and Notes? – After Debt Ceiling Accord, Here’s What Investors in Treasuries Should Watch – Debt Ceiling Agreement Reached by U.S. Government: Impact on Treasury Market – From Debt Ceiling Resolution to Treasury Investment Outlook: Key Considerations for Investors

The U.S. reached a deal on the debt ceiling. Here’s what might be next for investors in Treasurys

The U.S. reached a deal on the debt ceiling. Here’s what might be next for investors in Treasurys

Lawmakers have passed a bill to address the debt ceiling crisis, but investors are bracing themselves for an influx of Treasury securities to enter the market. This is because even though Congress has agreed to raise the debt ceiling and limit government spending for the next two years, the Treasury will still need to replenish its cash stores in its general account. Currently, the operating cash balance in the Treasury General Account is below $50 billion as of June 1, 2021. The Treasury will need to issue new bonds to refill its coffers and rebuild the general account balance to a target of $700 billion for the fourth quarter. According to Morgan Stanley, this means that the agency will need to issue around $1.25 trillion in total issuance from June through December, with about $730 billion worth of Treasury bill supply over the next three months alone.

While the large issuance of new Treasurys could push down prices of holdings in investors’ portfolios, “natural buyers,” such as money market funds and banks, will emerge to snap up the new issues, says Gene Tannuzzo, global head of fixed income at Columbia Threadneedle. There is enough pent-up demand to feed the beast if the Treasury is spending money, he added. Additionally, whether individual investors capture the benefit will depend on the Federal Reserve’s policy stance. If the central bank holds rates steady, income-focused investors who have been parking their money in short-term Treasurys at attractive yields may be able to do so a little longer, notes Tannuzzo.

While investors review their portfolios and think about the long-term advantages of keeping a diversified allocation that includes Treasurys, James Shagawat, a certified financial planner and partner advisor with AdvicePeriod, says that one should keep their longer-term goals and their portfolio composition in mind. Additionally, in a rising rate environment, if an investor needed to get money out early, they could take a loss if rates have gone up. Greg McBride, chief financial analyst at Bankrate, advises investors not to be in a hurry to pile into a maturity that is longer than their intended time frame.

FAQs:

What is the debt ceiling crisis?

The debt ceiling is a legal limit set by the US Congress on the amount of national debt that can be issued by the Treasury. The debt ceiling crisis arises when this limit is reached or is about to be reached, and Congress needs to raise the limit.

What is the Treasury General Account?

The Treasury General Account is the general checking account of the US government, held at the Federal Reserve Bank of New York.

What is an influx of Treasury securities?

An influx of Treasury securities refers to the Treasury issuing more bonds to replenish its cash stores in its general account. This increases the supply of Treasurys in the market, which can push down prices of holdings in investors’ portfolios.

What are the Federal Reserve’s policies on interest rates?

The Federal Reserve sets monetary policy by raising or lowering the target for the federal funds rate, which is the rate banks charge each other for overnight loans. This affects borrowing costs for individuals and businesses.

Why would an income-focused investor park their money in short-term Treasurys?

Short-term Treasurys typically offer attractive yields for income-focused investors.

The U.S. reached a deal on the debt ceiling. Here’s what might be next for investors in Treasurys
The U.S. reached a deal on the debt ceiling. Here’s what might be next for investors in Treasurys

Potential Outcomes for Treasury Investors Following the U.S. Debt Ceiling Agreement

Lawmakers passing a bill to raise the debt ceiling has brought relief to investors, but they are now anticipating a plethora of Treasury securities entering the market. Though Congress has agreed to raise the debt ceiling, the Treasury will still need to build up its cash stores in its general account. With the operating cash balance in the Treasury General Account below $50 billion as of June 1, the Treasury must issue new bonds to refill its coffers. According to Morgan Stanley, replenishing the general account balance to a targeted $700 billion for Q4 will require the Treasury to issue roughly $1.25 trillion in issuance from June through December – about $730 billion in Treasury bill supply over the next three months. A heavy issuance of new Treasurys could push down prices of holdings in investors’ portfolios, but banks and money market funds should absorb them, according to Gene Tannuzzo, global head of fixed income at Columbia Threadneedle. Holding rates steady could benefit income-focused investors who have parked money in short-term Treasurys at attractive yields, while those looking for longer-term investments should consider holding a diversified allocation that includes Treasurys to weather changing rates, advise experts.

Trả lời

Email của bạn sẽ không được hiển thị công khai. Các trường bắt buộc được đánh dấu *