What Does the Treasury’s Cash Balance Look Like Post August 2nd?

July 26th, 2011 by

From Gainesville Coins:

The debt ceiling quandary remains the market’s primary focus.  Both the Senate and House are moving forward with separate plans to increase the debt ceiling, but neither bill has much chance of becoming law without major modifications.

Several commentators have suggested that Treasury could maintain funding past the August 2nd deadline, in large part thanks to higher than expected tax revenue.  The following table from Stone McCarthy shows the projected Treasury cash balance on a daily basis from August 2nd to August 15th.

As can be seen, the situation would hit critical by August 15th.

The following graph from reuters shows cash outflows in a graph.

The seriousness of the current debt ceiling impasse is highlighted by these two similar data sets.

Precious metals investing has seen a strong run in the midst of the ongoing debt drama as the USD continues to fall against its international peers on a daily basis.  While Treasuries continue to indicate little real concern, Treasury yields have been edging higher of late, with the 10-year Treasury again hitting the 3% level.  Add in the possibility of a credit rating downgrade of the U.S. AAA rating, and the recent level of interest in gold and silver seems fairly easy to understand.

It should be noted that even with a successful resolution of the current debt ceiling impasse, there will remain a high probability of a U.S. credit rating downgrade given the size of the debt and future projected deficits.

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