Treasury Cash Pile Grows, But October Risks Loom Large

Reflecting incoming cash flows on a key tax date (Sep 15), the Treasury's account at the Fed grew in size by $133B on Sep 16 - the biggest one-day rise since July 1. A gain of roughly this magnitude was largely anticipated, and brings the total in the account to $344B - still $156B below the levels at the end of July when the debt limit suspension expired.

Source: Federal Reserve, MNI

• But attention remains firmly focused on mid-to-late October which is when the Treasury is estimated to run out of cash. Bipartisan cooperation to raise the debt limit and avert crisis looks unlikely, while Bloomberg ran a sources piece this week saying that it's "unclear" whether Congressional Democrats will attempt to include the debt ceiling in the upcoming stopgap spending bill.
• This standoff could have a broad impact, even putting aside potential sovereign default.
• Wrightson ICAP writes that "the risk that the October mid-month coupon auctions might be delayed by debt ceiling concerns seems even more remote now, but the odds that the Treasury might be able to meet its obligation past the first few days of November did not improve much. We continue to think debt ceiling issues would be likely to come to a head at some point in the second half of October in the absence of Congressional action."