The Treasury Department revealed on Monday that it expects to borrow $1.007 trillion in the third quarter, or $274 billion more than estimated in May.
Some of the issues facing Treasury ahead of year-end include the prospects of slowing economic growth plus the impacts of the Federal Reserve’s ongoing rate hikes and its shrinking balance sheet. The third-quarter borrowing estimate, which assumes an end-of-September cash balance of $650 billion, has gone up partly because of projections for lower receipts and higher outlays, Treasury officials said. Treasury’s refunding announcement is expected at 8:30 a.m. Eastern time on Wednesday.
“The risks to budget deficits are certainly to the upside over the next year, largely because of a likely slowdown in economic growth, higher financing costs due to higher rates, and the low likelihood of deficit reductions heading into an election year,” said Gennadiy Goldberg, head of U.S. rates strategy for TD Securities. “We now expect Treasury to continue auction size increases for the next three quarters.
Monday’s revised $1.007 trillion third-quarter estimate is the largest ever for the July-September quarter, Treasury officials said. However, it falls short of the almost $3 trillion borrowing estimate that Treasury gave in May 2020 after the U.S. onset of the COVID-19 pandemic for the April-June quarter of that year.