Treasury: Higher debt ceiling needed to fund gov't after September

Aug. 2 (UPI) -- The U.S. Treasury Department on Wednesday said Congress needs to raise the borrowing limit "promptly" because there is only enough money to fund the government through the end of September.

After its quarterly meeting this week, the agency's advisory committee "stressed the urgency and importance for Congress to raise the debt limit in a timely manner," according to a Treasury statement Wednesday.

The U.S. Senate plans to return from its August recess to consider raising the debt limit.

Last week, Treasury Secretary Steven Mnuchin urged Congress to raise the borrowing limit by Sept. 29. He said he would continue to suspend the issuance of new Treasury debt through that date.

Since mid-March, the government debt hit the statutory limit at nearly $20 trillion.

In its quarterly borrowing estimate, the Treasury's Office of Fiscal Projections expects a net marketable borrowing need of $96 billion for the fourth quarter of fiscal 2017, with an end-of-September cash balance of $60 billion.

In its projections, the agency said in the first quarter of fiscal year 2018, the net marketable borrowing need is anticipated to be "substantially higher" -- at $501 billion and a cash balance increasing to $360 billion by the end of next year.

Once the Federal Reserve begins shrinking its portfolio of $4.2 trillion in Treasury bonds and mortgage-backed securities, the department said it plans to increase the size of its auctions of Treasury bills and nominal coupons in response to increased borrowing needs.

The committee also said the Treasury should consider increasing auction sizes "across all tenors" while gradually increasing Treasury bills as a share of overall debt.

"In this environment, a tail risk stress scenario is that a small increase in yields could possibly lead to large changes in risk premiums," the committee said. "In an adverse scenario, there's the possibility of a meaningful, but not systemically risky, decline in both credit and equities."

The committee also urged Treasury to consider increasing coupon debt as soon as November, and as late as 2018's first quarter.

The department plans to offer $62 billion in Treasury securities from Tuesday through Aug. 10 to refund approximately $47.3 billion of privately held Treasury notes maturing on Aug.15. This will raise approximately $14.7 billion in new cash. These include $24 billion in three-year notes maturing Aug. 15, 2020; $23 billion in 10-year notes maturing Aug. 15, 2027; and $15 billion in 30-year bonds maturing in Aug. 15, 2047.