On January 25th, changes in the leadership of the US Treasury Department may alter the department’s attitude towards cash held at the Federal Reserve, with strategists warning that this move could affect the US bond market. Institutions such as Bank of America and Wrightson ICAP LLC have stated that as cash balances – the buffer of funds that ensures the United States can pay its bills – decrease, the Treasury Department may reduce the amount of funds held in Federal Reserve accounts. Against the backdrop of the debt ceiling being restored and cash balances shrinking, this will allow the government to issue fewer short-term bonds, potentially saving taxpayers’ funds.
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