MNI BRIEF: US Treasury Seeks Dealer Input on Summer Debt Limit

The U.S. Treasury has asked primary dealers for their input on the potential impact of the reinstatement of the debt limit later this summer on the Treasury market and financial markets generally ahead of May's refunding announcement.

Treasury officials have maintained that the department "still intends to gradually reduce the cash balance consistent with the guidance at the last quarterly refunding" to USD500 billion by the end of June from just under USD1 trillion currently. Deputy Assistant Secretary Brian Smith said last week in a speech that officials are "highly attentive" to how bill issuance and cash balance decisions affect money market trading decisions.

If Congress does not act, the debt limit would require the cash balance to be lowered to USD133 billion by Aug. 1. The Treasury's queries will be the focus of discussion between the Treasury and primary dealers ahead of their quarterly meeting later this month, and the refunding announcement is set to come May 5.