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US Treasury Lifts Quarterly Borrowing Estimate to $444 Billion

·2 min read

(Bloomberg) -- The US Treasury ramped up its estimate of federal borrowing for the three months through September after the Federal Reserve’s balance-sheet runoff plan increased its need to tap the private sector for financing.

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The Treasury Department boosted the quarterly borrowing estimate by about $262 billion, a release in Washington showed on Monday. The change reflects in part the Treasury having left out, back in May, any assumption for the Fed’s scaling back its holdings of Treasuries -- in advance of the formal Fed announcement. The Fed’s runoff began in June.

Treasury officials said that another reason for the big jump is a shift in projections for federal revenues, after a record influx last quarter. The latest indications suggest a drop-off in receipts and higher outlays, the officials said.

The Treasury’s debt managers now expect to borrow $444 billion in the July-through-September period, compared with the original estimate of $182 billion. The Treasury left unchanged its cash-balance estimate for the end of September, at $650 billion. That stockpile is currently around $597 billion.

For the three months through December, the Treasury said Monday that it anticipates borrowing $400 billion through net new marketable debt issuance. It assumes a cash balance of $700 billion at the end of the period.

Fed Impact

Fed redemptions contributed $120 billion to the July-through-September borrowing estimate, and $139 billion to the October-through-December estimate, the Treasury said.

The Fed last week raised rates by three-quarters a percentage point, and recommitted to its balance-sheet runoff plan. For July and August, the Fed is allowing a maximum of $30 billion of its Treasuries holdings to mature without reinvestment. The monthly pace will step up to $60 billion starting in September.

The Treasury on Wednesday will announce plans for its so-called quarterly refunding of longer-term securities. Most dealers predict US debt managers will scale back its auctions for a fourth straight quarter, predicting extra cutbacks for the 20-year bond, which has been plagued by limited liquidity.

Read more: ‘Problem Child’ 20-Year Bond in Focus for Treasury-Auction Plan

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