US lifts borrowing above forecasts to US$243bil
NEW YORK: The US Treasury ramped up its estimate for federal borrowing for the current quarter to US$243bil, more than most dealers had anticipated, in a move that largely reflects weaker cash receipts than officials had expected.

The Treasury Department said in a statement on Monday its net borrowing for April-through-June is now seen at US$41bil more than the previous prediction of US$202bil, released in late January.

US debt managers reiterated their earlier estimate for the Treasury’s cash balance for the end of June, of US$750bil.

The increase was “largely due to lower cash receipts,” which were partly offset by a higher cash balance at the start of this quarter, the Treasury said.

That news may come as a surprise to some budget watchers.

Strategists at Societe Generale SA had anticipated a reduction in the borrowing estimate to US$166bil, in part on an improvement in the financial deficit.

Treasury yields briefly pared their declines on the day after the Treasury’s release.

The upward revision was “somewhat surprising”, said Zachary Griffiths, head of US investment grade and macro strategy at CreditSights.

“Still, a US$41bil revision for the Treasury is a rounding error with the level of debt and deficits we’re dealing with.

“The market reaction indicates there is still a fair bit of sensitivity around the financial situation in the United States, although this really does not change anything from a longer-run perspective.”

Treasury officials didn’t incorporate any expectation for the Federal Reserve (Fed) to slow the pace of its run-off in treasuries holdings, currently set at up to US$60bil a month.

The Fed is widely expected to announce a tapering in that so-called quantitative tightening (QT) programme at its policy meeting today, while dealers have differing projections on when the scale-back will start.

“The Treasury won’t front-run the Fed’s QT announcement, so the pro forma financing estimates are likely to assume that service-oriented modelling and analysis runoffs will continue unabated over the forecast horizon,” Lou Crandall at Wrightson ICAP LLC wrote in a note.

While JPMorgan Chase & Co’s had been among those predicting an increase in the borrowing estimate, Monday’s figure exceeds their US$227bil prediction.

Their estimate incorporated an assumption that Fed QT for treasuries would be halved, beginning in May.

Later this week, the Treasury will announce its so-called quarterly refunding plan, where dealers expect the department to keep the size of note and bond auctions steady. Today’s announcement will come just hours ahead of the Fed’s own policy statement.

The Treasury’s cash balance was about US$908bil as of April 25, compared with US$844bil on Jan 29, when the department released its initial financing projections for the quarter.

US debt managers’ upcoming plans for a debt buyback programme “are not expected to significantly affect privately held net marketable borrowing, as new issuance replaces securities that are bought back”, the Treasury said on Monday. — Bloomberg
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The US Treasury ramped up its estimate for federal borrowing for the current quarter to US$243bil, more than most dealers had anticipated, in a move that largely reflects weaker cash receipts than officials had expected.