U.S. Treasury Lifts Quarterly Borrowing Estimate to $729 Billion

(Bloomberg) -- The U.S. Treasury boosted its estimate of federal borrowing needs for the three months through March after entering the quarter with a cash pile that was run down by congressional delays in lifting the government's debt limit.

The Treasury's new projections, released in Washington Monday, incorporate last month's move by lawmakers to increase the debt ceiling by an amount intended to last until early next year.

U.S. debt managers now expect to borrow $729 billion in the January-through-March period, about $254 billion more than the $476 billion in net marketable debt issuance it anticipated in November. The Treasury left unchanged its cash balance estimate for the end of March at $650 billion.

“For the first time in a great while, the financing projections are going to be relatively ‘normal,' free from complications due to record-setting stimulus bills or the crunch of the debt ceiling,”  Jefferies analysts Thomas Simons and Aneta Markowska wrote in a note before the Treasury announcement.

Soon enough, the Treasury is likely to face a new complication, however: the Federal Reserve shrinking its footprint in the Treasuries market. The Fed is ending its bond-purchase program in early March, and policy makers have telegraphed that later this year they'll start letting some of the holdings mature without reinvesting the proceeds. Monday's borrowing announcement doesn't reflect any changes in Fed policy, Treasury officials said.

Refunding Plan

For the three months through June, the Treasury anticipates borrowing $66 billion through net new marketable debt issuance, assuming a cash balance of $700 billion at the end of the period.

Monday's release comes ahead of the Treasury's so-called quarterly refunding statement, in which the department details the planned issuance of longer-term debt. Dealers predict another round of cuts to coupon-bearing debt auctions, following reductions in November. The report is due 8:30 a.m. New York time on Wednesday.

Read more: Fed's Tightening Plan Upends Outlook for Treasury Bond Sales

The Treasury's cash balance is about $642 billion now, compared with about $406 billion at the end of December.

The Treasury has since 2015 targeted a cash-balance buffer equivalent to about five days worth of expenditures.

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