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US Treasury projects $618 billion borrowing in Q4, $800 billion in Q1 2027

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In short

The Treasury increased its fourth-quarter borrowing forecast by $24 billion compared to earlier estimates, setting aside the impact of a larger cash balance. Market participants are monitoring the upcoming refunding announcement to see if issuance will shift away from long-dated bonds toward short- to medium-term notes. Officials are also supporting market liquidity by expanding the capacity of debt buyback operations for longer-dated securities.

Key points

  • Investors are anticipating a potential shift toward issuing more short- and medium-term d…: Investors are anticipating a potential shift toward issuing more short- and medium-term debt rather than longer-dated bonds.
  • Analysts consider 20-year and 30-year bond auctions as the prime candidates for future is…: Analysts consider 20-year and 30-year bond auctions as the prime candidates for future issuance reductions.
  • The maximum size of longer-dated debt buyback operations has expanded from $2 billion to…: The maximum size of longer-dated debt buyback operations has expanded from $2 billion to $6 billion to boost liquidity.

Sources checked by our analysis pipeline: 1

However, excluding the benefit of the larger cash cushion, borrowing requirements are $24 billion higher than previously estimated. The Treasury expects to end December with a cash balance of $850 billion.

For the first quarter of 2027, the Treasury projected borrowing of $800 billion, assuming an end-March cash balance of $1 trillion.

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The government borrowed $742 billion in the third quarter, ending September with a cash balance of $984 billion. The borrowing figure was above its August estimate of $739 billion but $30 billion lower than previously expected after adjusting for the higher-than-assumed ending cash balance, according to Reuters.

Investors will closely monitor the Treasury's quarterly refunding announcement on Wednesday for indications of potential changes to auction sizes in the coming quarters.

In August, the Treasury said it was continuing to evaluate possible future adjustments to coupon and floating-rate note auction sizes. This marked a shift from its May announcement, which had indicated the possibility of future increases in debt sales.

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