Get to know us. Our unbiased credit research and global market insights help the world’s financial decision makers to better manage risk.
US Strategy: Debt Ceiling 101
Winnie Cisar – Global Head of Strategy
Zachary Griffiths, CFA – Senior Analyst - U.S. Strategy
Brian Perez – Analyst - Strategy
EXECUTIVE SUMMARY
- We provide a brief explanation and analysis of the debt ceiling situation facing the U.S. government and how it may affect financial markets over the next several months.
- Treasury has already begun invoking “extraordinary measures” to continue to finance itself while keeping total debt subject to the limit below the current ceiling of $31.4 trillion.
- For credit markets, we think the debt ceiling impasse could heat up around midyear as extraordinary measures are no longer able to keep the Treasury below the debt ceiling and contribute to additional volatility. We see this as a key risk for a temporary widening in spreads leading into and around midyear.
RELATIVE VALUE
The debt ceiling is back in the headlines as the U.S. government is once again bumping up against the statutory debt limit. This is a situation that has arisen periodically over the past decade-plus. On January 19, 2023, Treasury Secretary Yellen sent a letter to Congressional leadership stating that Treasury has begun using “extraordinary measures” to prevent the U.S. government from beaching the debt limit. Given the complex (and politically fraught) nature of this topic, we provide answers to frequently asked questions about the debt ceiling and how we are factoring it into our outlook for credit.
1. What even is the debt ceiling?
According to the U.S. Department of the Treasury, the debt ceiling is “the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.” In practical terms, it is the amount of aggregate debt Treasury is allowed to borrow. Importantly, raising the debt ceiling does not authorize new spending commitments, it simply allows the government to meet spending obligations already signed into law by Congress and the President. It was last raised by $2.5 trillion on December 16, 2021 to a total of $31.4 trillion through Public Law 117-73.
To download the full article, fill out the form opposite and we’ll email you a PDF copy of the report.
Would you like access to the full report?
Submit your contact details to request the full report.
Request a Trial
Receive 1-month complimentary access to our research platform, where you can browse our library of expert-produced insights and reporting. Qualifying institutions can gain access to our platform.
REQUEST A TRIAL
Sign up to our Newsletter
It is our mission to enable fixed income professionals to know more, risk better, and ultimately create value. Sign up to receive our monthly newsletters to get the latest credit insights direct to your inbox.
SUBSCRIBE NOW
Our Products
We’re proud to be the trusted resource for these credit research consumers:
Research
The independent research and actionable ideas you need to help guide investment and risk management decisions.
Risk Products
From BondScore to Credit Quality Score and Fallen Angel Score, these products give you an analytial edge.
Covenant Review
Brokers, financial advisors and private wealth managers entrusted with their clients’ assets leverage our intellectual capital when it comes to the credit markets.
LevFin Insights
News and analysis covering the debt capital markets including leveraged loans, high yield, secondary trading, CLOs, middle market and BDCs.
Markets Served
We’re proud to be the trusted resource for these credit research consumers: