U.S. Lowers First-Quarter Borrowing Estimate

The U.S. Treasury Department lowered its borrowing estimate for the current quarter by 18 percent to $444 billion, reflecting higher receipts and lower spending.

The Treasury reduced its net borrowing estimate for January through March by $97 billion from a projection of $541 billion three months ago. U.S. Treasury officials also see net borrowing of $200 billion in the second quarter. The estimates set the stage for the Treasury’s quarterly refunding announcement on Feb. 1.

An accelerating economy is boosting tax revenue, helping the administration of President Barack Obama control a budget deficit it forecasts will narrow to $956 billion this fiscal year. Gross domestic product expanded at a 2.8 percent annual pace in the fourth quarter of last year, the most since the second quarter of 2010.

“If Congress can hold government spending in place, the deficit may finally come in at under $1 trillion in the not-too- distant future,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said by e-mail after the estimates were released.

The government posted a deficit of $1.3 trillion in fiscal 2011, which ended Sept. 30. That was about equal to the shortfall in the previous year and was the third-highest budget gap as a share of the economy since 1945, according to the nonpartisan Congressional Budget Office.

The Standard & Poor’s 500 Index fell 0.3 percent to 1,313.02 at the close of trading in New York as Greece sparred with European officials over the terms of a rescue package. The yield on the benchmark 10-year Treasury note fell to 1.85 percent at 4:26 p.m. from 1.89 percent late on Jan. 27.

Cash Balances

The Treasury said its forecasts assume a cash balance of $30 billion for the first quarter and $90 billion for the April- to-June period.

“The economy has recovered from the many setbacks it faced early last year and is clearly starting to firm,” Janice Eberly, Treasury’s assistant secretary for economic policy, said in a statement today in Washington. “While we are cautiously optimistic about the near-term outlook, we remain cognizant of the many challenges our economy still faces.”

For the quarter that ended Dec. 31, the Treasury said it borrowed a net $310 billion, compared with a previous estimate of $305 billion.

The Senate voted on Jan. 26 to permit an increase in the nation’s debt limit designed to be large enough to accommodate borrowing through the November election. The vote was required by a budget agreement last year in which Republicans agreed to give Obama the power to unilaterally raise the debt ceiling so long as they didn’t have to pass it.

‘Running Higher’

“Cash balances have been running higher through January than they were in the months leading up to the end of 2011,” Thomas Simons, a government-debt economist in New York at Jefferies Group Inc., a primary dealer, said in a note before the report. “If Treasury’s cash needs grow, there is room to draw down on existing balances instead of issuing such a substantial amount of new debt.”

The Treasury Department has said it expects no need for another increase in the debt limit until after the November election, though it’s impossible to say for certain because tax revenue can vary widely with the strength of the economy.

To contact the reporters on this story: Meera Louis in Washington at mlouis1@bloomberg.net Cheyenne Hopkins at Chopkins19@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net