The US Treasury reduced its estimate for federal borrowing for the current quarter after upgrading its projection for revenues, offering a contrast from recent data that had shown a rapid widening in the fiscal deficit.
The Treasury Department cut its net borrowing estimate for the October through December quarter to $776 billion, down from the $852 billion amount it had predicted in late July. US debt managers also projected that the Treasury’s cash balance will be $750 billion at the end of December, the same as the prevous outlook.
The new borrowing amount for the current quarter, published on Monday, was somewhat smaller than many strategists’ forecasts. JPMorgan Chase & Co. had penciled in an $800 billion figure, with the cash balance projected to be at $750 billion at the end of the year.
Despite the reduction in the estimate, the new projection still marks a record borrowing amount for the calendar fourth quarter. Part of the reason for the cut in the estimate is the magnitude of deferred tax receipts coming from areas of California and other states that had been granted extensions due to natural disasters, Treasury officials told reporters Monday.
The federal deficit roughly doubled in the fiscal year through September compared with the year before, effectively reaching $2.02 trillion, forcing the Treasury to step up its borrowing.
Next Quarter
For the January-to-March, quarter the Treasury said it expects to borrow a net $816 billion, with a cash balance of $750 billion seen for the end of the period.
The Treasury’s cash balance was about $835 billion as of Oct. 26, up from about $502 billion on July 31, when the department released its initial financing projections for this quarter.
The Treasury on Wednesday will announce plans for its so-called refunding of longer-term securities. Dealers expect US debt managers to lift coupon-bearing debt sales across the yield curve for the second straight time — though they don’t all agree on exactly which maturities will carry the most weight of the new issuance.
Read more: The Big Bond Market Event Wednesday Is at Treasury, Not the Fed
“Treasury’s current auction schedule is insufficient to meet its prospective financing needs” as “the funding gap remains large in coming years,” said Jay Barry, co-head of US rates strategy at JPMorgan.
The bank’s economists predict the Federal Reserve’s so-called quantitative tightening, which is forcing the Treasury to borrow more from the private-sector investors, will continue through the end of 2024. QT currently involves letting up to $60 billion a month of Treasuries mature without the Fed replacing those securities.