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The US Treasury Lowers Its Projected Borrowing for October And December To $776 Billion, While Interest Rates Decline

U.S. Job Market: Workers Push for $80,000 Minimum Salary as Economic Expectations Rise (Photo: What After College)
U.S. Job Market: Workers Push for $80,000 Minimum Salary as Economic Expectations Rise (Photo: What After College)

With higher revenue expectations, the U.S. Treasury Department announced on Monday that it intends to borrow $776 billion in the fourth quarter, $76 billion less than it had projected in July. This news provided some respite to bond markets that have been shook for months by an abundance of new debt.

According to a U.S. Treasury official, revenue is anticipated to increase from October to December in part because income tax payments that were postponed because of natural disasters in California and a few other states are now beginning to enter the Treasury.

U.S. Treasury paper yields decreased little as a result of the estimates; the benchmark 10-year yield was last at 4.88%.

‘Sloppy’ Bidding

The majority of maturities have seen an increase in auction sizes, and several recent sales have produced what some dealers have referred to as “sloppy” results. For example, the $52 billion of 5-year Treasury notes that were sold last week were the most ever, excluding the COVID-19 issuance bulge that occurred from 2020 to early 2022.

It had the lowest bid-cover ratio in almost a year, a sign of investor demand, and it executed at a yield marginally higher than what the so-called “when-issued” market had anticipated.

US Treasury

Source- MARCA

“We still think the term premium has some room to move up,” added Zeng. If the Treasury decides to be more proactive and issue more long-end bonds, “there still may be some ways they surprise the market.”

The entire amount of outstanding U.S. debt increased from $23.2 trillion in early 2020, before the epidemic caused record U.S. deficits, to $33.7 trillion as of June, up from $31.5 trillion.

Records Every Quarter

The revised borrowing forecast of $776 billion would still surpass the $689 billion in the 2021 quarter, which was buoyed by large COVID-19 relief outlays, and set a record for any October–December period.

While noting instances in which borrowings plus cash balance drawdowns had been larger for the period, the Treasury also projected borrowing $816 billion in the first quarter of 2024, a record for that period. The Treasury projects a sizable cash position of $750 billion by the end of March and December combined.

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