U.S. Sees Borrowing $1.4 Trillion in Second Half of 2021
(Bloomberg) -- The U.S. Treasury Department said the government will borrow almost $1.4 trillion in the second half assuming lawmakers raise or suspend the newly reinstated debt limit, as money continues to support coronavirus relief even before the impact of additional economic programs being considered by Congress.
The department expects to issue $673 billion in net marketable debt from July through September, $148 billion less than it estimated in May, according to a statement released Monday in Washington. The Treasury sees an end-of-September cash balance of $750 billion, unchanged from from its forecast three months ago.
The current and previous September estimate both assume enactment of a debt-limit suspension or increase. The ceiling was reinstated Sunday after a two-year break, and lawmakers have not yet formulated a concrete plan to avert default, which the Congressional Budget Office warned could come in October or November once Treasury exhausts special measures and its cash pile.
“Despite Treasury’s optimism and faith in Congress, we are much more doubtful that Treasury will have that much freedom at the end of September,” Jefferies economists Thomas Simons and Aneta Markowska said in a report. “Thus, we do not think there is much value to take away from these projections.”
During a briefing call with reporters, Treasury officials said they didn’t have a forecast for the cash balance if the debt limit isn’t raised or suspended by the end of September. They said the borrowing estimate would be reduced by the corresponding decline in the cash balance.
In its first estimate of the October-to-December period this year, the department estimated borrowing of $703 billion, with a projected cash balance at $800 billion at year’s end.
The borrowing estimates reflect current law and not the impact of any additional legislation, such as the $550 billion bipartisan infrastructure plan and a potential $3.5 trillion bill reflecting most of President Joe Biden’s economic agenda.
From April through June, the Treasury said it issued $319 billion in net marketable debt, less than its earlier prediction of $463 billion in borrowing, owing primarily to “an increase in receipts and a decrease in expenditures, somewhat offset by the increase in the end-of-June cash balance.” The cash balance was $852 billion at the end of June.
The Treasury will release additional details about its borrowing plans during the quarterly refunding announcement on Wednesday.
For the first time in more than five years, the U.S. Treasury in coming months will be scaling back its mammoth quarterly sales of notes and bonds, Wall Street dealers say -- in a shift so large it’s likely to more than counter the Federal Reserve’s potential pullback in purchases. While most dealers expect no change in the $126 billion size of recent refundings, many see officials setting the stage for a reduction in November.
Issuance has been going the other way for years, thanks to surging federal budget deficits in the wake of President Donald Trump’s tax cuts and later the emergency spending spurred by the pandemic. Even with Congress negotiating new packages on infrastructure and social programs, borrowing needs are set to drop, as lawmakers plan fresh revenue measures for those multiyear initiatives.
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