Within our latest CIO Special, 'T-Bill Torrent: what next after the U.S. debt ceiling deal?' we look to outline the next steps for investors as the U.S. Treasury looks to replenish its Treasury General Account (TGA) with a surge in supply.
We assess the impact on both rates and credit markets, equities as well as overall liquidity for markets attempting to find a home for over USD 1.1 trillion in freshly printed Treasury bills.
We highlight the following:
- The U.S. Treasury is expected to issue around USD 1.1 trillion of T-bills by the end of the year to replenish its empty TGA coffers.
- Combined with the Fed's ongoing quantitative tightening, this could reduce liquidity at an annual rate of 6% leading to further outflows of bank deposits.
- Going forward, shrinking bank deposits could create near-term headwinds for riskier assets – especially equities and high-yield bonds.