Treasury to Halt Local Bonds in 1st Emergency Debt-Limit Step

Wednesday, 26 Dec 2012 04:17 PM

 

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The U.S. Treasury on Wednesday announced the first in a possible series of emergency steps to push back the day when the government will exceed its legal borrowing authority as imposed by the U.S. Congress.

The Treasury said on Dec. 28 it would suspend issuance of State and Local Government Series securities, known as "slugs", which are special low-interest Treasury securities offered to state and local governments to temporarily invest proceeds from municipal bond sales.

Slugs, which count against the debt limit, have been suspended several times over the last 20 years to avoid hitting the debt ceiling.

The Treasury said it will also begin other measures, such as suspending certain retirement investments, which together will raise $200 billion. For a factbox on the U.S. Treasury's tools to delay hitting the debt limit, see

The Treasury said the debt ceiling is set to be reached on Dec. 31, but analysts believe extraordinary measures can stave that date off into February.

© 2014 Thomson/Reuters. All rights reserved.

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