The Blubber

The U.S. Treasury has significantly increased its borrowing estimate for the current quarter, citing a much smaller cash balance at the start of the period than previously anticipated — a result of Congress still not raising the federal debt ceiling.

In a statement released Monday, the Treasury Department said it now expects to borrow a net total of $514 billion from April through June, a sharp increase from the $123 billion it projected back in February. At the time, the department had, as usual, assumed the debt ceiling — which was reinstated in early January — would be lifted or suspended. However, lawmakers have yet to resolve the matter.

Back in February, the Treasury had forecast a cash balance of $850 billion at the end of March. In reality, it came in far lower, at roughly $406 billion. Because the debt ceiling restricts the government from issuing net new Treasury securities, this has constrained cash flow. Still, the Treasury maintained its forecast of an $850 billion cash balance by the end of June, continuing to operate under the assumption that the debt ceiling will be addressed.

“Excluding the lower than expected beginning-of-quarter cash balance, the borrowing estimate for the current quarter is $53 billion below what was projected in February,” the Treasury noted.

Lou Crandall, senior economist at Wrightson ICAP, pointed out prior to the announcement that the earlier borrowing estimates were made before President Donald Trump introduced a wave of new import tariff hikes. That additional tariff revenue, Crandall suggested, could also now be influencing how the Treasury manages its cash reserves.