Treasury Taps Retirement Funds to Avoid Breaching Debt Limit

As for the PSRHBF, the Treasury will suspend additional investments of amounts credited to that fund, Yellen said.

The so-called G Fund is a defined-contribution retirement fund for federal employees, and also invests in special-issue Treasury securities that count under the debt limit. Yellen’s letter on Thursday made no mention of the G Fund.

Yellen’s letter didn’t specify the amount of headroom under the debt ceiling that would be created by the extraordinary measures she listed.

The Treasury probably now has $350 billion to $400 billion of headroom available in all, said Gennadiy Goldberg, a senior U.S. rates strategist at TD Securities. That, along with the influx of revenue that will come from individual income taxes due in April, should let the Treasury go until sometime in the July to August window without running out of cash, he said.

Other measures the Treasury has taken in the past to conserve headroom under the debt limit include suspending the daily reinvestment of securities held by the Exchange Stabilization Fund. That’s a special vehicle that dates back to the 1930s, over which the Treasury secretary has wide discretion.

The Treasury previously has also suspended issuance of state and local government series Treasuries. Those securities are a place where state and local governments can park cash, and they count toward the federal debt limit. Those governments need to invest in other assets when SLGS issuance is suspended.

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