In the period from January through March, the U.S. Treasury borrowed $488 billion. That’s a record for the quarter and $47 billion more than the Treasury had earlier estimated. The Treasury finished March with a cash balance of $290 billion, up from an initial estimate of $210 billion.
The higher than expected cash balance is expected to send new issuance in the April to June period plunging to $75 billion. That should reduce upward pressure on yields in the quarter. (The earlier estimate was that April to June borrowing would total $176 billion.)
But then the dam breaks–again. For the July to September quarter the Treasury expects to borrow $273 billion.
The U.S. budget deficit continues to deteriorate (or “increase” if you prefer.) The budget deficit has widened to $600 billion halfway through the fiscal year that ends on September 30. The total budget deficit for fiscal 2018 is expected to reach $804 billion (up from $665 billion in fiscal 2017.) Looking out a bit farther, the budget deficit is forecast to pass $1 trillion by fiscal 2020, according to the Congressional Budget Office.
But Treasury Secretary Steve Mnuchin says he’s not worried. “I’m not concerned about that. I think that there are still a lot of buyers for U.S. Treasuries.” In a official statement included with the news on the size of Treasury borrowing in the first quarter, the department said that tax changes are “poised to underpin near-term consumption and investment” and “the stage is set for a pick-up in growth over the near term.”
Of course, no one actually knows this. So a plan that assumes that everything will be okay because growth will pick up, a key argument in the Republican tax cut plan, is just a hope.
Good luck to us all.