WASHINGTON — Sales of State and Local Government Series Securities will resume Tuesday at noon EST, the Treasury Department said, after President Obama signed legislation Monday that suspends the debt limit through March 15, 2017.
The SLGS window had been closed since March as one of the "extraordinary measures" the Treasury Department took to preserve the nation’s borrowing capacity as the amount of publicly held U.S. debt approached the debt limit.
State and local governments often purchase SLGS for their advance refunding escrows. When the SLGS window is closed, they have to solicit bids for open market Treasury Securities. Market participants have said that it is most difficult to purchase open-market Treasuries instead of SLGS for small issues with short defeasance escrows.
In addition to suspending the debt limit, the legislation Obama signed — the Bipartisan Budget Act of 2015 — raises discretionary spending caps for fiscal years 2016 and 2017. Obama said Monday that "by locking in two years of funding, it should finally free us from the cycle of shutdown threats and last-minute fixes. It allows us to, therefore, plan for the future."
The Bipartisan Budget Act also reduces spending in fiscal 2025 by extending to that year sequestration of mandatory spending. This means that cuts to federal subsidy payments for Build America Bonds and other direct-pay bonds will continue in that year.
Sequestration of mandatory spending was initially supposed to last through fiscal 2021, but it was extended through fiscal 2023 under a 2013 budget agreement. It was then extended through 2024 in February 2014 in a bill that repealed reductions in cost of living increases for younger military retirees.
