US Treasury boosts Q2 borrowing outlook; keeps issuance plans in focus

By Gertrude Chavez-Dreyfuss

NEW YORK, May ‌4 (Reuters) - The U.S. ​Treasury ​said on Monday it now expects to borrow $189 billion in the second quarter, $79 billion more than it projected in February, with the increase largely ‌driven by weaker cash flows than anticipated, which were partly offset ⁠by higher cash at the start of the quarter.

Treasury said the forecast assumes a cash balance of $900 ‌billion at the end of June. ‌Stripping out the benefit of the larger‑than‑expected starting cash balance, second‑quarter borrowing would be $122 billion higher than the February estimate.

Looking ahead, Treasury said it expects to ​borrow $671 billion in the third quarter and end September with a cash balance of $950 billion.

For the first quarter, Treasury said it borrowed $577 billion in privately held net ⁠marketable debt, finishing March with a cash balance of $893 billion. In February, it had projected $574 billion in borrowing and ​an end‑March cash balance of $850 billion.

The slightly higher borrowing reflected the larger‑than‑expected cash balance at the end of the first quarter, partly ​offset by stronger cash flows. Excluding the cash ‌balance difference, actual borrowing came in $40 billion lower than forecast.

Bond investors are now focused on Wednesday's refunding announcement, which will outline Treasury's ⁠financing plans for the second and third quarters.

Treasury is widely expected to leave auction sizes for notes and bonds unchanged for a ninth consecutive quarter. However, the prospect of large tariff ⁠refunds has heightened attention on whether — and when — the government may boost issuance of longer‑dated debt.

As much ​as $166 billion could be returned to importers.

J.P. Morgan estimates that roughly $127 billion of that total will be eligible for electronic refunds, with the first meaningful payments likely to land in June and ‌July after a 60‑to-90‑day processing window. The bank expects about $30 billion in refunds to be paid in 2026 and the remaining $90 ‌billion or so in 2027.

Morgan Stanley said in a research note that the balance of ⁠risks points to coupon increases occurring ‌later than its February 2027 ​baseline, likely concentrated in shorter‑dated maturities, particularly the five‑ to seven‑year sector.

(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Nick Zieminski and ‌Matthew Lewis)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Exclusive-Trump approval falls to 33%, lowest of his presidency, Reuters/Ipsos poll finds
• French presidential candidate Philippe wins support of minister Darmanin
• Kushner, Netanyahu agree on path forward for Gaza, Board of Peace official says