US Treasury to borrow $1.2 trillion in third quarter to rebuild cash
NEW YORK - The US Treasury said on July 28 it expects to borrow US$1.007 trillion (S$1.29 trillion) in the third quarter, partly to replenish its cash balance that dwindled during the latest debt ceiling episode.
The figure was US$453 billion higher than its April estimate, primarily due to the lower beginning-of-quarter cash balance and projected lower net cash flows. The third-quarter financing projection assumes cash of US$850 billion at the end of September for the Treasury, the department said in a statement.
Much higher borrowing in the third quarter was needed to rebuild the Treasury's cash balance following
President Donald Trump's tax and spending Bill being signed into law on July 4. The debt ceiling increased by US$5 trillion to US$41.1 trillion following the spending legislations enactment.
The Treasury's cash had dropped to US$313 billion on July 3, data from money market research firm Wrightson ICAP showed.
'These (financing estimates) are in line with our projections and should not be a surprise to the markets since the increased financing need is almost all due to the shortfall in cash balances on Sept 30, which was a function of the debt limit,' said Ms Kim Rupert, managing director, global fixed income analysis at Action Economics,
The Treasury also said it expects to borrow US$590 billion in the fourth quarter, as it projects a cash balance of US$850 billion at the end of December.
In the second quarter, the Treasury said it borrowed US$65 billion in privately-held marketable debt, ending the period with a cash balance of US$457 billion.In April, Treasury had estimated borrowings of US$514 billion and assumed an end-of-June cash balance of US$850 billion.
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The Treasury will unveil details of its borrowing estimates for the quarter on July 30 when it announces its financing plans. It is widely expected that the Treasury will maintain current auction sizes for notes and bonds and will likely keep them steady for some time.
Investors will be looking for guidance as to how long the Treasury can hold off not raising the size of the debt auctions used to fund the ballooning US budget deficit. REUTERS
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