U.S. Treasury's cash reserves face variability, say strategists at Bank of America and others: could affect bond markets

A change in leadership at the U.S. Treasury could alter the department's approach to cash held at the Federal Reserve, a move strategists warned could affect the U.S. bond market. Bank of America and Wrightson ICAP LLC, among others, said the Treasury may reduce the amount of money it keeps in its account at the Fed as cash balances - the cushion of money that ensures the U.S. can pay its bills - dwindle. Against the backdrop that the debt ceiling has been restored and cash balances are shrinking, this would allow the government to issue fewer short-term bonds and in turn potentially save taxpayer money.