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Effects of the “Fiscal Responsibility Act” in America

Effects of the “Fiscal Responsibility Act” in America

The US debt ceiling deal (the “Fiscal Responsibility Act”) now awaits President Biden’s final approval.

The deal reduces uncertainty significantly, but will mean only a small reduction in spending and will have little impact on growth. As attention turns to the economy and the outlook for central bank monetary policy action, the reduction in uncertainty has lifted riskier assets. Nearly $1 trillion in net transactions in U.S. Treasury bills (T-bills) are expected to occur in the coming months as the Treasury replenishes its cash hoard. It drains liquidity from the Federal Reserve’s reverse repo facility (RRF) and bank reserves.

What are the implications of these developments for fixed income? Read our current fixed income update here.

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