U.S. Treasury Activates Another Manoeuvre To Avoid Breaching Debt Limit  

 

• U.S. Treasury Secretary Janet Yellen activated another extraordinary cash management measure on Tuesday to avoid breaching the federal debt limit, suspending daily reinvestments in a large government retirement fund that holds Treasury debt, the department said.
• In a letter notifying Congress of the move to access the Government Securities Investment Fund (G Fund), Yellen did not alter a projected early June deadline for when the Treasury may no longer be able to pay the nation's bills without an increase in the $31.4 trillion statutory borrowing limit.
• The G-Fund manoeuvre is one of the largest tools the Treasury can employ to reclaim borrowing capacity under the debt ceiling. Yellen last week suspended reinvestments in two other retirement and health benefit funds as the government nominally reached the debt ceiling.
• Normally the money market-like retirement fund reinvests its entire balance daily into special-issue Treasury securities that count against the debt limit. Halting the reinvestments allows more normal Treasury bills, notes, and bonds to be issued.
• But the Treasury is required by law to replenish the fund and any lost earnings once a debt limit impasse ends. Federal retirees and employees would be unaffected by this action. "I respectfully urge Congress to act promptly to protect the full faith and credit of the United States," Yellen wrote, repeating a regular line in her letters to lawmakers.

(Source: Reuters)