US Treasury to Borrow $243 Billion in Q2, Higher Than January Forecast

The U.S. Treasury said on Monday it expects to borrow $243 billion in the second quarter, $41 billion more than the January estimate largely due to lower cash receipts, partially offset by a higher cash balance at the beginning of the quarter.

The second-quarter financing estimate assumes a cash balance of $750 billion at the end of June, the Treasury said in a statement.

Attention now turns to Wednesday when the Treasury will detail its borrowing plans and auction sizes of various maturities.

With yields near the highest in months, the market has been highly attuned to the supply of Treasuries as concerns mount over rapidly rising U.S. debt.

The Federal Open Market Committee is expected to keep its benchmark rate unchanged on Wednesday at the end of its two-day meeting. Speculation is growing that the Federal Reserve will not pivot to easing rates until late this year, given the U.S. economic strength and inflation that is stuck above its target rate of 2%.

At the same time, the Fed is expected to soon taper its quantitative tightening program, in which it lets bonds it bought during the pandemic to mature without replacing them on its balance sheet. That will affect how much cash the Treasury needs to raise via Treasury bills.

Treasury officials said on Monday the borrowing estimates assumed no change to the Fed's current $60 billion per month roll-off of Treasuries.

The Treasury also announced it expects to borrow $847 billion in the third quarter, as it projects a cash balance of $850 billion at the end of September.

It also said in the first quarter the Treasury borrowed $748 billion in net marketable debt. It ended the first quarter with a cash balance of $775 billion.

The Treasury explained that the end-March cash balance was $12 billion below the January forecast because higher cash receipts and lower outlays were partially offset by a $25 billion higher ending cash balance.