(CNN) — The U.S. Treasury canceled its sale of two-year debt slated for next week due to fears Congress won’t act in time to raise the debt ceiling.
Treasury specifically cited “debt ceiling constraints” caused by the current “impasse” in Washington.
The two-year note sale was scheduled for October 27.
Last week the Treasury said it estimates that “no later than” November 3, it is likely to exhaust special accounting measures that are keeping the country’s debt below its legal limit.
If Congress doesn’t act by then, it puts the Treasury at risk of defaulting soon after on many of its legal obligations.
The Treasury cancellation is a reminder of the seriousness of the debt ceiling stalemate gripping Washington.
Treasury said the impasse is already “adversely affecting” the operation of government financing, increasing borrowing costs for the government, reducing Treasury bill supply and raising the risk tied to holding a lower cash balance.
There are already early signs of an impact at least on short-term debt. Rates on one-month Treasury bills due in November spiked earlier this week to levels unseen since 2013. Treasury also noted this spike in rates in rates.
Treasury urged Congress to raise the debt ceiling as soon as possible.
“The creditworthiness of the United States is not a bargaining chip, and Congress should address this matter without controversy or brinksmanship,” Treasury said in a statement.
Treasury said it still plans to go forward with a five-year auction on October 28 and a seven-year one on November 2.
“Treasury believes that postponing the auction for the two-year note poses less risk for market functioning than postponing the 5-year or 7-year note offering,” Treasury said in a statement.
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