Please note: this article is more than one year old. The views of our CIO team may have changed since it was published, and the data on which it was based may have been revised.
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.