The Treasury Department said Monday it expects to borrow $729 billion in the first quarter, which is $254 billion higher than previously estimated. The increase was driven, in part, by a lower cash balance than expected. The updated forecast includes an end-of-quarter cash balance of $650 billion.
Looking ahead to the second quarter, Treasury said it expects to borrow $66 billion in net marketable debt with a cash balance of $700 billion. Borrowing is less in the April-June quarter because of the mid-April deadline for individual taxpayers to file their tax returns.
In all of 2021, the Treasury borrowed $1.42 trillion from investors to fund all government programs, including emergency spending to combat the coronavirus pandemic.
Borrowing costs for the government will rise this year if the Federal Reserve raises interest rates as expected. The department is also expected to eventually have to issue more debt to accommodate a reduction in the Federal Reserve’s holdings of Treasurys, as part of the central bank’s plan to shrink its $9 trillion balance sheet.
Nancy Van Houten, senior economist at Oxford Economics, said Treasury can manage the Fed’s redemptions this year with accumulated cash and increased bill issuance.
In the October-December quarter, Treasury said it borrowed $689 billion in net marketable debt and ended with a cash balance of $406 billion. This was much lower than the Treasury’s prior borrowing estimate of slightly more than $1 trillion, which included a cash balance of $406 billion.
Additional financing details related to the Treasury’s quarterly refunding will be released at 8:30 a.m. Eastern on Wednesday.
The yield on the 10-year Treasury note TMUBMUSD10Y, 1.789% rose up to 1.78% on Monday.