Conference Agenda

We show that the debt ceiling significantly impacts the duration of government liabilities through an unintended interaction of the Treasury’s issuance rules and the debt ceiling constraint. During debt ceiling episodes, the Treasury systematically allows more bills to mature than it issues. In recent years, this force has induced fluctuations in bill supply greater than one percent of GDP. Exploiting this, we devise an instrument for the supply of bills and show that the debt ceiling has distorted convenience premia and the price of short-term investment-grade corporate credit. We attribute the Treasury’s implicit decision to lengthen the duration of its liabilities as a response to an intermediation constraint.