House Democrats have scuttled plans to include a $1.8 trillion boost to the national debt limit in the upcoming defense appropriations bill, and instead plan to propose separate legislation that would raise the limit by $200 billion and allow the Treasury Department to continue issuing debt for two more months.

But if Congress does not pass legislation boosting the federal debt limit by the end of the year, the Treasury would likely hit its current $12.1 trillion ceiling and close the window for state and local government series securities, or SLGS, which municipal issuers purchase for refunding escrows to avoid earning arbitrage.

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