By Gertrude Chavez-Dreyfuss
NEW YORK, May 4 (Reuters) – The U.S. Treasury said on Monday it now expects to borrow $189 billion in the second quarter, $79 billion more than it projected in February, with the increase largely driven by weaker cash flows than anticipated, which were partly offset by higher cash at the start of the quarter.
Treasury said the forecast assumes a cash balance of $900 billion at the end of June. Stripping out the benefit of the larger‑than‑expected starting cash balance, second‑quarter borrowing would be $122 billion higher than the February estimate.
Looking ahead, Treasury said it expects to borrow $671 billion in the third quarter and end September with a cash balance of $950 billion.
For the first quarter, Treasury said it borrowed $577 billion in privately held net marketable debt, finishing March with a cash balance of $893 billion. In February, it had projected $574 billion in borrowing and an end‑March cash balance of $850 billion.
The slightly higher borrowing reflected the larger‑than‑expected cash balance at the end of the first quarter, partly offset by stronger cash flows. Excluding the cash balance difference, actual borrowing came in $40 billion lower than forecast.
Bond investors are now focused on Wednesday’s refunding announcement, which will outline Treasury’s financing plans for the second and third quarters.
Treasury is widely expected to leave auction sizes for notes and bonds unchanged for a ninth consecutive quarter. However, the prospect of large tariff refunds has heightened attention on whether — and when — the government may boost issuance of longer‑dated debt.
As much as $166 billion could be returned to importers.
J.P. Morgan estimates that roughly $127 billion of that total will be eligible for electronic refunds, with the first meaningful payments likely to land in June and July after a 60‑to-90‑day processing window. The bank expects about $30 billion in refunds to be paid in 2026 and the remaining $90 billion or so in 2027.
Morgan Stanley said in a research note that the balance of risks points to coupon increases occurring later than its February 2027 baseline, likely concentrated in shorter‑dated maturities, particularly the five‑ to seven‑year sector.
(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Nick Zieminski and Matthew Lewis)
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