Tsy Borrowing Requirements: Divergent Views On Year-End Cash (1/2)

Quarterly Refunding week kicks off at 1500ET today with the release of Treasury's marketable borrowing estimates (the full quarterly refunding announcement including upcoming coupon auction sizes is Wednesday).

• Treasury is expected to lower its borrowing estimates for the Jul-Sep quarter despite a slightly larger "actual" financing need given wider-than-expected fiscal deficit. At the last quarterly refunding announcement in May, they made a preliminary estimate of $847B. However this is likely to be revised down by around $100B for two main reasons:
• First, the cash balance was a little higher than previously expected at end-June; second, Treasury did not assume a taper in Fed QT when it drew up its projections: the Fed started reducing Treasury runoff by $35B/month in June, leaving the financing requirement $105B lower per quarter (though this figure is not exact as it depends on redemption dates etc).
• While the end-quarter cash balance in the Treasury General Account is expected to meet the prior $850B projection, the big question today is what Treasury projects for end-Dec.
• That's because the current suspension of the debt ceiling resets on January 2, 2025 - leaving it an open question as to how much cash Treasury will - and can - build up ahead of that date, ensuring that there is enough cash on hand to smooth out the various fiscal ups and downs were Congress to fail to reach a compromise.
• As a result of these uncertainties, more on which in the next note, we've seen Oct-Dec borrowing requirements range from $400B-835B, corresponding with a wide expected range of end-year cash of $550-850B.