US Treasury Plans to Borrow $1.3 Trillion Over Next 6 Months

U.S. Treasury Secretary Janet Yellen attends a press conference at U.S. Ambassador's residence in Beijing on April 8, 2024. (Pedro Pardo/AFP via Getty Images)

The federal government plans to borrow $1.3 trillion over the next six months, according to the Treasury Department’s latest Marketable Borrowing Estimates published on July 29.

In the July-September quarter of fiscal year 2024, the Treasury expects to borrow $740 billion in privately held net marketable debt. This is down $106 billion from the previous estimate, made in April 2024. The drop takes into account mainly the Federal Reserve slowing its redemptions of Treasury securities and a higher beginning-of-quarter cash balance.

In May, the monetary authorities announced plans to slow the pace of the central bank’s balance sheet drawdown to prevent volatility in the financial markets. Beginning June 1, the Fed reduced the limit on Treasury securities that are allowed to mature and not be replaced to $25 billion.

Officials assume an end-of-September cash balance of $850 billion.

During the October-December quarter of fiscal year 2025, the Treasury projects borrowing $565 billion, assuming an end-of-quarter cash balance of $700 billion.

The financial markets will monitor the Treasury’s cash balance closely as Washington potentially embarks upon another round of debt ceiling negotiations. The federal debt limit will be reinstated on January 2, 2025.

Meanwhile, the Treasury borrowed $9 billion less in the April-June quarter of the current fiscal year. In this three-month span, the federal government borrowed $234 billion and finished the quarter with a cash balance of $778 billion.

The Treasury will release its Quarterly Refunding estimates on July 31, outlining its near-term debt issuance schemes.

Debate Over Short-Term Debt Issuance

Over the last 12 months, Washington has been flooding the financial markets with more than $2 trillion worth of short-term debt securities. The acceleration in sales of T-bills—bonds that mature from 30 days to one year—has been part of the current administration’s efforts to manage higher interest payments and ballooning budget deficits.

Looking ahead over the next year, the Bank of America predicts short-term bonds will account for 40 percent of net Treasury issuance.

Bank analysts may have based their projections on the Treasury Borrowing Advisory Committee’s conclusion this past fall.

“The Committee expressed continued comfort with the bill share of total marketable debt outstanding remaining temporarily above its recommended range given continued robust demand for bills and Treasury’s regular and predictable approach,” minutes from an October 31 meeting summary stated.

A pair of economists assert that the federal government could be engaging in “activist Treasury issuance” (ATI) by “managing financial conditions” and the broader U.S. economy.

Nouriel Roubini, professor at New York University, speaks during the 2022 Concordia Annual Summit - Day 3 at Sheraton, New York, on Sept. 21, 2022. (John Lamparski/Getty Images for Concordia Summit)

“By manipulating the amount of interest rate risk owned by investors, ATI works through the same channels as the Fed’s quantitative easing program,” wrote Hudson Bay Capital’s Nouriel Roubini and Stephen Miran in a July note.

“We calculate that ATI has reduced 10-year yields over the last year by roughly a quarter of a percent, providing similar stimulus as a one-point cut in the Fed Funds rate, the central bank’s primary policy tool.”

Appearing before a Senate Appropriations Committee hearing on June 4, Treasury Secretary Janet Yellen dismissed claims that demand for long-term U.S. government debt is shrinking or that public policymakers are waiting for the Federal Reserve to cut interest rates before issuing bonds with longer maturities.

“We never time the market,” Ms. Yellen told Sen. Bill Hagerty (R-Tenn.).

$35 Trillion Milestone

On the day the Treasury announced its borrowing intentions over the next few months, the department’s Debt to the Penny data confirmed that the national debt breached the $35 trillion mark on July 26.

The United States had reached the $34 trillion milestone less than seven months earlier.

This is “sobering” and “unsurprising,” says Maya MacGuineas, the president of the Committee for a Responsible Federal Budget.

“Yet despite all the risks and warning signs, these alarm bells seem to be falling on deaf ears,” MacGuineas said in a statement. “We are going to have to get serious about the debt, and soon. Election years cannot be an exception for trying to prevent completely foreseeable dangers – and the debt is one of the major dangers we are facing.”

The Congressional Budget Office (CBO), a non-partisan budget watchdog, recently adjusted its deficit forecast for the current fiscal year. The federal deficit is projected to be $1.9 trillion this year, up from the previous forecast of $1.5 trillion.

In its 2024-2034 budget and economic outlook update, the CBO expected the annual shortfall to be nearly $3 trillion in the next ten years.

By 2035, the national debt is anticipated to surpass $50 trillion.