Wall Street's Early Read Places Debt-Cap Deadline in Mid-2025.

Wall Street is already speculating on when the US government will exhaust its borrowing authority once the debt ceiling returns in early 2025, with predictions ranging from July to August. The immediate concern is Congress's need to avoid a potential government shutdown at the end of this month. After the current debt-ceiling suspension ends on January 1, the Treasury Department will have to rely on extraordinary measures and cuts to bill issuance to continue borrowing until the debt cap can be raised or suspended again. The debt ceiling is often a source of contention in Congress, and the resulting standoffs can impact the rates market. Citigroup and Bank of America strategists estimate that the Treasury will have over $1 trillion in cash to deploy in the new year, but the exact deadline for the debt cap remains uncertain. The distortions in short-term rates caused by the debt limit could also affect the Federal Reserve's ability to monitor money-market signals and determine whether it can continue unwinding its balance sheet without creating liquidity scarcity. Bank of America strategists suggest that the Fed may need to end its balance sheet runoff by late 2024 or the first quarter of 2025 to avoid draining too much liquidity. [Extracted from the article]