Treasury Cuts Fourth-Quarter Borrowing Estimate to $618 Billion Despite Higher Underlying Needs
Key Facts
The U.S. Treasury on November 2 cut its borrowing estimate for the fourth quarter of 2026 to $618 billion, down $10 billion from its August estimate, in a revision that reflects a higher-than-assumed starting cash balance partly offsetting a decline in projected net cash flows. Reuters said the Treasury expects to borrow that amount from October through December. The headline figure points to lower expected financing for the quarter, but the effect of starting cash changes the picture for underlying needs. Excluding the impact of the larger cash balance, borrowing needs rose $24 billion compared with the August estimate. The Treasury assumed its cash balance would be $850 billion at the end of December.
The August estimate for the fourth quarter was $628 billion in privately held net marketable debt, based on an ending cash balance of $850 billion. That means the published forecast cut to $618 billion does not by itself translate into a comparable decline in underlying financing needs, as the higher starting cash balance helped reduce the reported figure. The Treasury defined privately held net marketable borrowing as excluding the rollover of securities held by the Federal Reserve System’s Open Market Account. It includes, however, the financing needed for that account’s maturities. This definition sets the scope of the figure as the debt the Treasury must finance in the market outside the excluded rollovers.
The Treasury projected borrowing of $800 billion in the first quarter of 2027, based on a cash balance of $1 trillion at the end of March. That estimate follows borrowing of $742 billion in the third quarter of 2026, when it ended September with a cash balance of $984 billion. Actual third-quarter borrowing was above the August estimate of $739 billion, but $30 billion below the expected amount when adjusted for the higher-than-assumed ending cash balance. The comparison highlights how borrowing estimates are shaped by the Treasury’s targeted cash levels as well as cash flows. The figures for the next two quarters also place the expected financing path in the context of a targeted cash balance of $850 billion in December, then $1 trillion in March.
Market participants are focused on the mix of borrowing maturities, not just total financing. Reuters said the Treasury will present its refunding plans on Wednesday, and the market will watch for any signal of changes to auction sizes in coming quarters. Analysts were divided over the possibility of increasing auctions of benchmark 10-year Treasury notes. If auctions of longer maturities are cut, analysts expect the focus to be on 20- and 30-year bonds, while increases in coupon auctions may be concentrated in maturities from 2 to 7 years. Those possibilities hinge on what the Treasury announces in its refunding plan.
In its August refunding statement, the Treasury said it expected to maintain nominal coupon and FRN auction sizes for at least the next several quarters, while continuing to assess potential changes. It also said debt management policy changes are typically considered and announced through the quarterly refunding process. On August 19, it announced that it would double the maximum size of long-term Treasury buybacks to at least $4 billion per operation from $2 billion, with the change set to continue through November 4. In the bond market, the 10-year Treasury yield fell to 4.93% on October 30 from 4.98% late the previous day, after topping 5.30% earlier in the month. The Associated Press attributed the decline to investors turning to bonds for safety.
The upcoming U.S. data calendar includes the September international trade in goods and services report, due November 4, followed by the October jobs report on November 6 at 8:30 a.m. Eastern time. The U.S. Census Bureau set the date for the trade report, while the Bureau of Labor Statistics listed the jobs report on its calendar. The release dates follow the borrowing estimates and the anticipated refunding plan. The sequence gives market participants a chance to track economic data releases during the same week the Treasury presents its financing plans. The focus in the debt market remains on what the refunding plan reveals about upcoming auction sizes.