THE WisdomTree BLOG
“Clark…Could You Maybe Spare a Little Extra Cash?”
Treasury supply considerations usually are not the primary driver of interest rate trends. However, they can affect rate direction on a broader scale, and that is why the Fed’s balance sheet normalization process could end up being the gift that keeps on giving the whole year.
How concerned should investors be about the pending debt ceiling debate? History has shown us that a resolution always seems to be found. Based on what happened in 2011 and 2013, one would be forgiven for concluding that the 2017 experience will be messy as well.
After a variety of suspensions and resets, the current debt ceiling of $19.8 trillion was put in place on March 15 this year. Since then, “extraordinary measures” have been used to create room for Treasury borrowing to continue to occur. This approach has been utilized many times in the past, but at some point, these measures become exhausted, and action needs to take place. Without Congressional action, this is the position in which Treasury soon will find itself.