Key facts
- The U.S. Treasury now expects to borrow $739 billion in the third quarter.
- This represents an increase of $68 billion from the previous estimate.
- The department anticipates borrowing $628 billion in the fourth quarter.
- Treasury will announce its refunding plans, including auction sizes, on Wednesday.
The U.S. Treasury announced on Monday that it expects to borrow $739 billion in the third quarter, an upward revision of $68 billion from its May projection. This increase is primarily due to lower projected cash flows, with the impact only partially mitigated by a higher-than-assumed starting cash balance.
Stripping out the benefit of the larger starting cushion, the actual increase in borrowing needs is $87 billion above the May estimate. The department's quarterly refunding statement anticipates a cash balance of $950 billion at the end of September.
Looking ahead to the fourth quarter, the Treasury projected borrowing of $628 billion, based on an expected year-end cash balance of $850 billion. In the second quarter, the department borrowed $190 billion, concluding June with a cash balance of $919 billion, which was $1 billion above its May projection and $18 billion less than expected when excluding the higher-than-assumed end-of-quarter cash balance.
The Treasury is set to detail its refunding plans, including auction sizes, on Wednesday. Market participants will be closely monitoring for any indications that the department intends to increase its issuance of longer-dated debt in the coming quarters.
The significance of Wednesday's announcement has grown recently, with surging oil prices due to escalating tensions between Israel and Iran raising concerns about already high inflation and pushing longer-term Treasury yields to multi-year highs. Against this backdrop, analysts suggest the Treasury has an incentive to adhere to a predictable issuance path and avoid any surprises that could further destabilize a sensitive bond market.