US Treasury Plans to Borrow $1.3 Trillion Over Next 6 Months

In the July-September quarter of fiscal year 2024, the Treasury expects to borrow $740 billion in privately held net marketable debt. This is a $106 billion decrease from the previous estimate, attributed to factors such as the Federal Reserve slowing its redemptions of Treasury securities and a higher beginning-of-quarter cash balance.

Following the Fed’s announcement to slow the pace of its balance sheet drawdown in May, the limit on Treasury securities allowed to mature without replacement was reduced to $25 billion starting June 1.

The Treasury projects an end-of-September cash balance of $850 billion and anticipates borrowing $565 billion in the October-December quarter of fiscal year 2025, assuming an end-of-quarter cash balance of $700 billion.

With the federal debt limit set to be reinstated on January 2, 2025, the financial markets will keep a close eye on the Treasury’s cash balance as potential debt ceiling negotiations loom.

In the April-June quarter of the current fiscal year, the Treasury borrowed $9 billion less than expected, totaling $234 billion for the quarter and ending with a cash balance of $778 billion.

The Treasury will release its Quarterly Refunding estimates on July 31 to outline its upcoming debt issuance plans.

Debate Over Short-Term Debt Issuance

Over the past year, Washington has flooded the financial markets with over $2 trillion in short-term debt securities, including T-bills maturing within 30 days to one year, to manage higher interest payments and increasing budget deficits.

Economists suggest that the federal government may be engaging in “activist Treasury issuance” (ATI) to manage financial conditions and the broader U.S. economy.

Treasury Secretary Janet Yellen, speaking at a Senate Appropriations Committee hearing on June 4, dismissed claims of shrinking demand for long-term U.S. government debt or waiting for the Federal Reserve to lower interest rates before issuing longer-term bonds.

The Congressional Budget Office has revised its deficit forecast for the current fiscal year, now projecting a $1.9 trillion deficit, with expectations of nearly $3 trillion annual shortfalls over the next decade.