In recent days, Secretary of the Treasury Janet L. Yellen has been at the forefront of several critical financial and legislative issues. One of the most pressing matters involves the debt limit, a topic that has garnered significant attention from both the Treasury Department and Congressional leadership.
On January 17, 2025, Secretary Yellen sent a letter to all members of Congressional leadership, updating them on the actions the Treasury Department is taking in regard to the debt limit. She noted that the Fiscal Responsibility Act of 2023 had suspended the statutory debt limit through January 1, 2025, and established a new limit effective January 2, 2025. Yellen informed the leaders that the Treasury expected to reach this new limit between January 14 and January 23, 2025[1].
To manage this situation, Yellen announced that the Treasury would begin using extraordinary measures starting January 21, 2025. One of these measures involves a "debt issuance suspension period" for the Civil Service Retirement and Disability Fund (CSRDF), which will last through March 14, 2025. During this period, the Treasury will suspend additional investments in the CSRDF and redeem a portion of the existing investments, actions authorized by law and previously taken by her predecessors under similar circumstances[1].
In addition to these immediate financial management strategies, the Treasury Department has also been engaged in broader economic and fiscal planning. The Treasury Borrowing Advisory Committee (TBAC) recently reviewed the Treasury's February 2025 Quarterly Refunding Presentation. This review highlighted several key economic indicators, including robust growth in the U.S. economy, supported by consumer spending, and a stabilization of the unemployment rate at around 4.1%-4.2% in the second half of 2024. The committee noted that market concerns about employment risks have diminished, with payroll job growth averaging 165,000 per month and a historically low layoff rate of 1.1%[3].
The TBAC also discussed the implications of government policies on Treasury issuance plans and market interest rates. The committee emphasized the importance of flexibility in future issuance decisions due to elevated uncertainty regarding macroeconomic developments and the fiscal trajectory. They recommended maintaining current nominal coupon auction sizes and increasing the sizes of certain Treasury Inflation-Protected Securities (TIPS) auctions[3].
Furthermore, Secretary Yellen and the Treasury Department are navigating the complexities of fiscal policy and its impact on various markets. The department is closely monitoring expectations regarding government policies, including a potential fiscal package that aims to lower taxes and spending while raising new revenue through tariffs. These policy changes are expected to influence Treasury issuance plans and market interest rates, as well as respond to news on trade policy and other economic factors[3].
In summary, Secretary Yellen's recent activities reflect a proactive approach to managing the nation's debt limit, navigating economic growth and employment trends, and planning for future fiscal policies. Her actions and communications with Congressional leadership underscore the Treasury Department's commitment to maintaining financial stability and addressing the complex economic challenges facing the country.
