The US Treasury said Wednesday that it could begin cutting the size of its debt issues as a narrower deficit allows it to pay down some of its debt this quarter for the first time since 2007.
With the sharp mandated cuts in government spending and the normal annual tax-season jump in receipts, the Treasury expects to be able to repay a net $35 billion of the country’s $16.8 trillion debt load.
It would be the first time in six years the US was able to, temporarily, reduce its debt.
But helped by the January increase in payroll and other taxes, and the government “sequester” spending cuts launched in March, the Treasury said that, even as the country returns to a net borrower status in the coming quarters, it might be able to slow the pace of borrowing.
“As is typical after the April tax season, borrowing needs have declined,” the Treasury said in a statement Wednesday.
“We anticipate that this seasonal decline in borrowing needs will last through the remainder of the third fiscal quarter” ending June 30, it said.
In addition, it said, “Depending on how the fiscal situation develops, Treasury may decide to gradually decrease coupon auction sizes.”
A cut in the rate of US bond issues, a key global savings and investment instrument, could reshape global debt markets, and the Treasury said it would update the market on its intentions going ahead.
Meanwhile the Treasury said it will be able to continue funding the government past May 18, when the government debt ceiling prevents any net increase in borrowing.
The Treasury said it would invoke “extraordinary measures” to keep the federal activities going without additional cutbacks for an unspecified time after May 18.
Increasing the debt ceiling has been linked, as in the past two years, to agreement by the White House and opposition Republicans in Congress on a new federal budget and long-term debt reduction plan.
US could cut debt issues as deficit narrows
