Treasury Reassures Markets About Secret Debt-Ceiling Plan

Bloomberg/Saleha Mohsin & Liz McCormick/07-17-17

Treasury Department officials called bond traders and their advisers on Friday to assure them that the Trump administration isn’t considering prioritizing U.S. debt payments if Congress fails to increase the nation’s borrowing authority later this year, according to two people familiar with the matter.

The calls came after Bloomberg News published a story about worries among traders that Treasury Secretary Steven Mnuchin may have to employ a secret plan written by the Obama administration to make sure debt payments are made, potentially at the expense of salaries for government employees, payments to contractors and other obligations.

The Congressional Budget Office forecasts the federal government will hit its debt ceiling some time in October. Treasury Secretary Steven Mnuchin has urged Congress to increase the nation’s borrowing authority without brinkmanship, as in 2011 when a political showdown triggered the first downgrade of U.S. debt.

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