US Treasury’s Cash Pile Jumps $108 Billion on Tax Day

(Bloomberg) — Uncertainty continues to linger about whether or not the US will make it through to late summer without risking a debt-ceiling-related default after figures indicating the size of the Treasury’s tax day cash influx were somewhat lackluster.

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The amount of money that the US government has on hand to pay its bills jumped just $108.47 billion on Tuesday. That could be enough to help see it through, but it may be a close run thing, according to TD Securities strategist Gennadiy Goldberg.

The tax receipts received on Tuesday boosted a cash pile that’s been whittled down in a bid to avoid crashing into the nation’s statutory debt limit. The Treasury Department’s cash balance rose to $252.55 billion on Tuesday from $144.08 billion the day before as payments related to the Internal Revenue Service’s main annual filing deadline rolled in, according to data published Wednesday.

The Treasury’s bank account has been under downward pressure recently because of measures being taken to avoid breaching the $31.4 trillion debt cap and last week dwindled to as little as $86.55 billion.

The change in the cash balance boosts the Treasury’s coffers to a level last seen on March 20. Whether that provides enough breathing room for lawmakers to find a solution to the debt-limit standoff and avoid a technical default remains to be seen.

The one-day increase is only the biggest since Jan. 24, a date that saw the Treasury get more than $101 billion in net new cash from bill-sale settlements.

Bank of America Corp. strategists wrote last week that the deadline that an increase in the Treasury cash pile of more than $200 billion following tax day would be strong, while a figure of less than $150 billion would be weak, based on historical precedent.

A key question is whether revenues prove big enough to get the Treasury through until an anticipated influx of tax money on June 15 — when some payers have installments due. If so, then it’s also likely to bridge the gap to the next available extraordinary measures on June 30 and stave off default until later in the summer. Conversely, if they end up being insufficient for that, then the government might not even make it to June 15.

Analysts poring over the numbers were uncertain about whether the influx would be enough.

“I think it’s going to be close, but we should be able to get past June 15th, which should put the X-date sometime in late-July or early-August,” said TD’s Goldberg.

Up until now, estimates for the so-called drop-dead date have been wide — anywhere from early summer through to the US fall — but detail on the government’s cash position this week could help investors and officials to refine their views.

Jefferies economist Thomas Simons said that it potentially leaves a June deadline as a possibility. “Tax receipts are going to keep trickling in for the next like three weeks and if the pace slows more than usual, June could be back in play.”

Morgan Stanley’s Michael Zezas, writing before the release of the latest figures, said he expected an April 18 increase of around $86 billion — less than actually came in — and a total increase of $156 billion by the end of April, estimates that are in line with an August X-date.

The narrowing window for negotiations is likely to become an increased focus for lawmakers in the coming weeks, with US House Speaker Kevin McCarthy on Wednesday unveiling his plan to lift the nation’s borrowing limit, but not without new curbs on spending. The 320-page plan would increase the debt ceiling by $1.5 trillion, enough to stave off a US payments default until March 31, 2024 at the latest. It also contains a host of conservative proposals that are non-starters with congressional Democrats and the White House.

Republicans have long sought to make any deal contingent on spending cuts, while President Joe Biden has insisted that ceiling and budget issues ought to be separate.

–With assistance from Christopher Anstey.

(Updates throughout.)