After releasing a stronger than expected revenue forecast, the US Treasury Department lowered its federal government borrowing forecast for the current quarter on Monday, which breathed a sigh of relief for investors worried about the rapid expansion of the fiscal deficit.
Specifically, the US Treasury Department announced that in the fourth quarter of this year from October to December, it is expected that the federal government will borrow $776 billion, a decrease of $76 billion from the previous estimated borrowing amount of $852 billion at the end of July. By the end of December, the Treasury Department expects the US Treasury's cash balance to be $750 billion, which is the same size as previously estimated.
At the same time, the US Treasury Department also predicts that in the first quarter of 2024, as of March next year, the borrowing amount will be $816 billion, and by the end of the quarter, the cash balance will still be $750 billion.
It is worth noting that the new borrowing volume announced on Monday for this quarter was lower than many strategists' expectations. JPMorgan Chase&Co. had previously estimated a borrowing size of $800 billion, with no change in cash balance estimates.
Although the estimate has been lowered, the new forecast still marks a historic high for borrowing in the fourth quarter. US Treasury officials told the media on Monday that part of the reason for the decrease in borrowing is due to the large amount of deferred income tax revenue in California and other states, which have been granted deferred tax payments due to natural disasters.
In the fiscal year ending in September, the federal deficit increased by about twice compared to the same period last year, effectively reaching $2.02 trillion, forcing the Treasury to increase its borrowing efforts.
Next year's first quarter
The US Treasury Department also stated on Monday that it expects a net borrowing of $816 billion for the quarter from January to March next year, with a cash balance of $750 billion expected at the end of the first quarter.
As of October 26th, the cash balance of the US Treasury Department was approximately $835 billion, higher than the $502 billion initial financing forecast for this quarter released on July 31st.
In Wednesday's so-called quarterly refinancing, traders expect bond management companies to increase interest bearing bond sales across the entire yield curve for the second consecutive time - although they are not entirely consistent on which maturities will account for the largest proportion of newly issued bonds.
Jay Barry, co head of US interest rate strategy at JPMorgan, said: "The current auction plan of the US Treasury is not sufficient to meet its expected financing needs," as "the financing gap in the coming years will still be significant
Economists at the bank predict that the Federal Reserve's so-called quantitative tightening policy will continue until the end of 2024. This policy forces the Ministry of Finance to borrow more funds from private sector investors.