US Treasury Plans to Borrow $1.37 Trillion Over Next 6 Months

Treasury Secretary Janet Yellen speaks at the Council on Foreign Relations in New York City on Oct. 17, 2024. Andrew Kelly/Reuters

The federal government plans to borrow $1.369 trillion over the next six months, the U.S. Department of Treasury announced on Oct. 28.

According to the latest Marketable Borrowing Estimates, the Treasury expects to borrow $546 billion from October to December. This is $19 billion lower than the department’s July announcement, “largely due to a higher beginning-of-quarter cash balance partially offset by lower net cash flows.”

Washington borrowed $762 billion from July to September, which was $22 billion more than projected.

In the January to March quarter, the Treasury then plans to borrow $823 billion, assuming an end-of-March cash balance of $850 billion. This three-month period potentially coincides with another round of debt-ceiling negotiations and expectations that Congress will raise or re-suspend the debt limit.

If the forecasts are accurate, the first-quarter 2025 borrowing would represent the largest nominal amount for this period.

The government’s latest projections were released ahead of its quarterly refunding announcement on Oct. 30, in which the Treasury Department will outline its plans for long-term debt issuance.

In recent years, the U.S. government has issued trillions in short-term debt securities—bonds that mature in terms ranging from 30 days to one year—to manage higher interest payments and growing budget deficits.

The federal shortfall was $1.83 trillion for fiscal year 2024—the third-highest on record.

While Treasury Secretary Janet Yellen has told lawmakers that she is not timing the financial markets, Sen. Bill Hagerty (R-Tenn.) suggested this past spring that the current administration was waiting for the Federal Reserve to start cutting interest rates.

Private-sector estimates suggest that Treasury bills will represent 40 percent of net Treasury issuance.

Lackluster domestic demand has recently challenged the Treasury as foreign investors have dominated auctions.

The Treasury auction of $70 billion in five-year notes resulted in a higher-than-expected yield of 4.138 percent, caused by sluggish investor demand. Nearly 77 percent of the supply was purchased by international investors.

Last year, the Treasury Borrowing Advisory Committee concluded that issuing short-term bonds can be cheaper for the government than selling off medium- and long-term debt securities.

However, while it had been expected that the Fed’s reduction in interest rates would result in lower U.S. government bond yields, the Treasury market has rocketed over the past month.

The benchmark 10-year yield has risen by more than 60 basis points since the Sept. 16 low. It surged to as high as 4.3 percent during the Oct. 28 trading session—the highest level since July.

It was a classical case of “buy the rumor, sell the news,” Adam Turnquist, chief technical strategist at LPL Financial, said.

“Investors priced in lofty rate cut expectations ahead of the highly anticipated September Federal Open Market Committee (FOMC) meeting,” Turnquist said in a note. “And even though the Federal Reserve delivered a 0.50 percent interest rate reduction, investors sold the news, sending Treasury yields notably higher. In fact, 10-year yields are now up over 0.50 percent since the September 18 rate cut.

Federal Reserve Chairman Jerome Powell’s speech is seen on a television screen as traders work on the New York Stock Exchange floor during morning trading on Aug. 25, 2023. Michael M. Santiago/Getty Images

Monetary policymakers announced a 50-basis-point interest rate cut in September, the first reduction in more than four years. The Summary of Economic Projections suggests that more rate cuts will follow over the next two years, with the median policy rate expected to fall to 2.9 percent by 2026.

Fed Chair Jerome Powell has suggested that he and his colleagues can take it slow on the way down to lower rates.

“This is not a committee that feels like it’s in a hurry to cut rates quickly,” Powell said at a National Association for Business Economics event last month.

$36 Trillion Milestone Incoming

According to Treasury data, the national debt topped $35.8 trillion on Oct. 24, three months after reaching the $35 trillion milestone.

The national debt has surged by $1.2 trillion since the beginning of the year.

Higher interest payments have accelerated the federal government’s ballooning public debt levels. In the last fiscal year, net interest charges ate up about one-fifth of revenues.

In its latest October Fiscal Monitor, the International Monetary Fund (IMF) stated that increasing U.S. debt and deficit levels have a “low probability of stabilizing by 2029.”

IMF economists predict that the budget deficit will stay above 6 percent of gross domestic product (GDP) until at least 2029. Additionally, their short-term outlooks were also revised higher, with the deficit anticipated to be 7.3 percent of GDP in 2025, up from the previous forecast of 7.1 percent.

“Under current policies, the US public debt is not stabilized, reaching almost 134 percent of GDP in 2029,” the IMF concluded.

Neither presidential candidate this election cycle has presented a plan to address the national debt, Mark Malek, chief investment officer at Siebert Financial, said.

“In reality, and we have history as our guide, the spending will more likely not be paid for and the overall deficit will increase. How will those expenditures be paid for? Of course, through increased borrowing,” Malek said in a note viewed by The Epoch Times.