USD: Extends gains

The Treasury General Account balanced closed Jun 29 at $465B, a level not seen since February - meaning that with a net -$40B drawdown on Jun 30, the target cash level of $425B will have been reached.

• Even though $57B in net cash is set to be raised on Jun 30 from coupon bonds less coupon payments, high outgoing fiscal payments (primarily on Medicare) points to a final June balance will that is lower than the Jun 29 level. But it will be close to or above the target in the roadmap laid out by Treasury on Jun 7 after the resolution on the debt limit.
• That included the end-June expectation of $425B, but also included a further increase in the balance expected in July, then a decline in August, before heading to $600B by end-Sep.
• It's unclear whether we will get any more updates before early August's refunding announcement though Treasury noted on Jun 7 that it would "carefully monitor market conditions and adjust its issuance plans as appropriate".
• So far there has been little problem in terms of market absorption of the increase in issuance, but with the bulk of the cash rebuild in the rear view mirror, net bill sales are set to slow from their breakneck pace once we get past this week's abbreviated schedule.
• One estimate is Wrightson ICAP's for the TGA to peak at $558B on Jul 27-28 (from $388B Jul 3), falling in the following few days to $511B at end-July.