US Treasury cuts fourth-quarter borrowing estimate to $618 billion

By Karen Brettell

Nov 2 (Reuters) - ‌The US Treasury ​said ​on Monday it expects to borrow $618 billion in the fourth quarter, $10 billion less than it projected in August, due to a ‌higher-than-assumed starting cash balance that is partially offset by lower ⁠projected net cash flows.

Stripping out the benefit of that larger starting cushion, the increase in ‌borrowing needs is $24 billion ‌above the August estimate. It assumes a cash balance of $850 billion at the end of December.

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

The Treasury borrowed $742 billion in the third quarter, ending September with a ⁠cash balance of $984 billion. That was above its August projection of $739 billion but $30 billion less than ​expected when excluding the higher-than-assumed end-of-quarter cash balance.

Treasury will detail its refunding plans on Wednesday and traders will be watching ​closely for any sign that it plans ‌to change auction sizes in coming quarters.

In August, the government said that it continues to evaluate potential future changes ⁠to its coupon and floating-rate auction sizes, a shift in language from its May refunding announcement when it noted potential future increases to the debt sales.

That raised ⁠speculation that the Treasury may eventually cut the size of some longer-dated auctions and ​lean more heavily on Treasury bills and short- and intermediate-dated coupons to cover its funding needs.

If that happens, analysts see the 20- and 30-year auctions as the most ‌likely to be reduced, with coupon increases concentrated in the 2- to 7-year sector. Analysts are divided on whether ‌benchmark 10-year note auctions could also grow.

Traders will also watch for changes to ⁠Treasury's buybacks, which are meant ‌to support market liquidity. ​Treasury has increased its longer-dated buybacks to a maximum of $6 billion per operation from $2 billion.

(Reporting by Karen Brettell; Editing by ‌Chizu Nomiyama )

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