The U.S. Treasury Department said it will borrow about 13 percent more this quarter than it projected three months ago, boosting its year-end cash cushion before the next debt-limit showdown in early 2014.
Issuance of net marketable debt will be $266 billion in the October-to-December period, compared with $235 billion initially forecast on July 29, the department said Monday in Washington. The estimate assumes a cash balance of $140 billion on Dec. 31, a $60 billion increase from a July estimate and the largest quarter-ending cash target since 2011.
Disagreements in Congress over the nation’s fiscal direction are clouding the Treasury’s outlook for debt management this quarter and next. An Oct. 16 measure ended a partial government shutdown and suspended the nation’s debt ceiling until Feb. 7.
“The Treasury is being cautious as a large cash balance gives the Treasury more flexibility given the political risks with the debt ceiling that are not too far away,” said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, one of the 21 primary dealers that trade with the Federal Reserve. “They would rather have too much and not need it then to have the opposite situation.”
The yield on 10-year Treasuries was 2.60 percent at 3:51 p.m. in New York, compared with 2.58 percent when the department released its last refunding announcement on July 31.
In the January-March period next year, borrowing needs were estimated to be $265 billion, with a March 31 cash balance assumption of $45 billion, the Treasury said.
The department said it issued $197 billion in net marketable debt last quarter, less than the $209 billion estimated three months ago, with a Sept. 30 cash balance of $88 billion.
Monday’s estimates are made as part of the department’s quarterly refunding announcement set for Nov. 6, when the Treasury will announce the size of auctions of three-, 10- and 30-year securities.
The 16-day government shutdown that resulted from the October budget gridlock led economists to lower their estimates for U.S. fourth-quarter economic growth to a 2 percent annualized rate from a 2.4 percent pace before, according to a Bloomberg survey released Nov. 1.
“While the economy is poised for stronger growth over the coming year, the political process poses some risk,” Treasury Deputy Assistant Secretary for Economic Policy Seth Carpenter said in a statement accompanying Monday’s borrowing needs announcement. “The debt-ceiling impasse and shutdown of the federal government likely weighed on growth and hiring at the start of the fourth quarter.”
The Treasury is planning to sell the first floating-rate notes at the end of January to expand its investor base and limit borrowing costs, according to a July 31 statement.
The budget shortfall narrowed to the smallest in five years in the 12 months ended Sept. 30 on record revenue and the largest spending decline since the Eisenhower administration, the Treasury said Oct. 30.
Treasury Secretary Jacob J. Lew last month urged lawmakers to “replace the corrosive across-the-board cuts known as sequestration with fair and balanced deficit reduction policies.”
“It is now time for Congress to make a pro-growth, pro- jobs agenda the focal point,” Lew said on Oct. 31. “This will strengthen our economy at home and further cement the United States as the best place to invest, hire and grow businesses."
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