US Treasury Signals Stable Borrowing, Eyes on Refunding

The U.S. Treasury has slightly lowered its borrowing estimate for the first quarter, now expecting to raise $574 billion, a $3 billion decrease from its November forecast. The revision comes as a larger opening cash balance helped cushion a projected decline in net cash flows.

Alongside its first-quarter plans, the Treasury announced it expects to borrow $109 billion in the second quarter. The department aims to maintain a cash balance of $850 billion by the end of March and increase it to $900 billion by the end of June.

First-Quarter Financing Breakdown

While the headline borrowing figure for the current quarter is down, the adjustment is primarily due to the higher-than-anticipated cash on hand at the start of the period. When this factor is excluded, the borrowing estimate is actually $19 billion higher than projected in November.

Analysts noted that the updated forecasts signal continuity. "The estimates reflect little change from November and, thus, present little risk of any changes to coupon auction sizes in the near term," wrote Thomas Simons, chief U.S. economist at Jefferies, in a research note.

Reviewing the Fourth Quarter of 2025

In the final quarter of 2025, the Treasury borrowed $550 billion in privately-held net marketable debt, concluding the period with a cash balance of $873 billion.

This was a departure from its November estimate, which had projected $569 billion in borrowing against an assumed end-of-December cash balance of $850 billion. The $20 billion reduction in borrowing was attributed mainly to stronger-than-expected net cash flows, moderated by the higher ending cash balance. Excluding the cash balance effect, actual borrowing was $42 billion lower than initially announced.

Market Awaits Key Refunding Announcement

With the latest borrowing estimates released, the bond market's attention is now fixed on the Treasury's quarterly refunding announcement scheduled for Wednesday. This release will provide concrete financing plans for the first and second quarters.

The consensus expectation is that the Treasury will hold its note and bond auction sizes steady for the eighth consecutive quarter.

Investors will be watching closely for any guidance on the department's next moves. Key questions include whether the Treasury will offer more details on future increases in coupon issuance or if it might signal cuts in long-end issuance. A reduction in long-term debt sales would align with the Trump administration's stated goal of lowering long-term borrowing costs.

However, analysts believe a policy shift is unlikely for now. "There is no reason to expect that the Treasury will cut back on coupon issuance any time soon," Simons commented. He added that while Treasury Secretary Scott Bessent has previously expressed a desire to reduce long-end issuance, "there are still too many unknowns in the outlook to justify reducing coupon auction sizes."