- The US House of Representatives passed a bill that temporarily suspended the $31.4 trillion debt ceiling.
- The US Treasury Department is holding an auction for $173 billion worth of short-term Treasury bills.
- The influx of Treasury bills is likely to reduce the availability of US dollar liquidity and increase yields on US Treasury bonds.
US House Passes Debt Ceiling Bill
On Wednesday, the U.S. House of Representatives managed to secure the backing of both Democrats and Republicans and successfully passed a bill that seeks to temporarily suspend the $31.4 trillion debt ceiling.
Treasury Bill Auction by US Treasury Department
Right after this, the U.S. Treasury Department didn’t wait long to start offering Treasury bills immediately. On June 5, the U.S. Treasury is prepared to hold an auction for $173 billion worth of short-term Treasury bills as part of its efforts to replenish its diminished cash reserves. It anticipates reaching a total of $1 trillion in Treasury bills by the conclusion of the third quarter.
Decline in Cash Reserves
According to the auction schedule released by the U.S. Treasury Department, there will be a Treasury bill auction on June 5th which includes three different types: 13 weeks ($65 billion), 26 weeks ($58 billion), and 44 days ($50 billion). The cash reserves in the US Treasury General Account experienced a significant decline – from $635 million in March down to just $22 million at present – indicating a substantial reduction in available funds globally and particularly within risky assets such as cryptocurrencies like Bitcoin, which may face increased volatility or lower returns due to higher yields on treasury bonds and strength of UDS Dollar Index (DXY).
Impact on Financial Markets
By conclusion of third quarter it is expected that around one trillion dollars worth T-bills will be released into markets reducing availability liquidities within USD market leading towards recessionary fears amongst investors as well as increase in yield rates with DXY rising beyond 104 mark currently at 104+ points level today .