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$1Trillion Fundraise to Spook Bonds

As we enter the crucial Debt limit week, the talks remain volatile with no clarity of what is next. But given that both parties do not want US defaulting a deal will be reached whether before or after the deadline is yet to be seen.

This brings the focus to US Treasury, as Sectary Yellen has mentioned that 1st June is the hard deadline. Over the weekend, she added that Treasury might not be able to pay the bills even till 15th June. The day some cash comes through advance tax payments.

She reached such a conclusion as the cash balance was $ 95 Bn on 16th May and some reports say it will be below the minimum of $30 Bn by 8th or 9th June. This level is the lowest since 13th April 2023 but more important similar to the low of 20th December 2021. This date is important as the last debt limit hike was during December 2021 as well.

After raising the limit, US Treasury raise funds from the market with a quick speed raising the cash level to $964 Bn within 5 months. This pressure along with the first rate hike raised the US 10Yr Bond Yield from 1.5% to 3%.

The same scenario might occur when the debt limit is raised again. This time the Bond yield is already at 3.6% but will it cross the recent high of 4%, that is an important concern for the market.


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