Investments

UPDATE 1-U.S. Treasury prompts one other maneuver to keep away from breaching debt restrict

(Provides particulars on G Fund, debt ceiling measures)

By David Lawder

WASHINGTON, Jan 24 (Reuters) – U.S. Treasury Secretary Janet Yellen activated one other extraordinary money administration measure on Tuesday to keep away from breaching the federal debt restrict, suspending every day reinvestments in a big authorities retirement fund that holds Treasury debt, the division stated.

In a letter notifying Congress of the transfer to entry the Authorities Securities Funding Fund (G Fund), Yellen didn’t alter a projected early June deadline for when the Treasury could now not have the ability to pay the nation’s payments with out a rise within the $31.4 trillion statutory borrowing restrict.

“The statute governing G Fund investments expressly authorizes the Secretary of the Treasury to droop funding of the G Fund to keep away from breaching the statutory debt restrict,” Yellen wrote within the letter to Home of Representatives Speaker Kevin McCarthy, a Republican, and different congressional leaders. “My predecessors have taken this suspension motion in comparable circumstances.”

Yellen final week suspended reinvestments in two different retirement and well being profit funds as the federal government nominally reached the debt ceiling. Republicans who now management the Home have threatened to oppose a debt ceiling enhance with out spending reductions from the Biden administration.

The G-Fund maneuver is likely one of the largest instruments that Treasury can make use of to reclaim borrowing capability underneath the debt ceiling. The fund, a part of the Thrift Financial savings Plan for federal workers, had web belongings of $210.9 billion on the finish of 2021, in response to its most up-to-date annual report.

Usually the cash market-like retirement fund reinvests its total stability every day into special-issue Treasury securities that depend in opposition to the debt restrict. Halting the reinvestments permits extra regular Treasury payments, notes and bonds to be issued.

However the Treasury is required by legislation to replenish the fund, together with any misplaced earnings, as soon as a debt restrict deadlock ends. Federal retirees and workers could be unaffected by this motion.

“I respectfully urge Congress to behave promptly to guard the complete religion and credit score of america,” Yellen wrote, repeating a daily line in her letters to lawmakers.

(Reporting by David Lawder; Enhancing by Tim Ahmann and Jonathan Oatis)

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