The passage of last week’s budget reconciliation bill will lead to a rapid increase in bill issuance in the coming months.  While this will be a marked shift from the paydowns of the past four months, it will not be as dramatic as the surge in bill supplies in the aftermath of the last debt ceiling episode.  On the other hand, it will have significant implications for the Fed’s balance sheet.  The rebound in the Treasury’s cash balance will drain reserves from the banking system over the coming months.  Our best guess is that the supply of reserves will remain “ample” at least through year-end.  However, we cannot rule out the possibility that frictions might start to appear at the front end as early as this fall.