The Treasury Department said Monday it expects to borrow $673 billion in the third quarter, which is $148 billion lower than previously estimated. The decline was driven, in part, by lower outlays than expected. The updated forecast includes an end-of-quarter cash balance of $750 billion.
Looking ahead to the fourth quarter, Treasury said it expects to borrow $703 billion in net marketable debt with a cash balance of $800 billion.
These estimates are clouded by a failure of Congress to raise or suspend the debt limit. A two-year agreement that suspended the debt limit expired on Aug. 1. With no deal in place, Treasury might not be able to borrow money, if not for extraordinary accounting measures used to continue standard operations. Treasury officials have said it is unclear how long these stopgap measures will last, especially with all of the spending surrounding the pandemic.
Analysts don’t expect Congress to act on the debt ceiling until after the current July-September quarter. But the department’s estimate for borrowing in the next six months assumes that Congress will act.
Essentially, the Treasury’s estimates released this afternoon reflect what the Treasury would do if allowed to by Congress, rather than what is likely to happen, said Lou Crandall, chief economist at Wrightson ICAP.
In the April-June quarter, Treasury said it borrowed $319 billion in net marketable debt and ended with a cash balance of $852 billion. This was slightly higher than the Treasury’s prior borrowing estimate of $463 billion, which included a cash balance of $800 billion.
Additional financing details related to the Treasury’s quarterly refunding will be released at 8:30 a.m. Eastern on Wednesday.
The yield on the 10-year Treasury note
briefly dipped below 1.15% on Monday, its lowest rate since February, and remains down 5.8 basis points at 1.176%. Yields fall as Treasury prices rise.