U.S. Treasury Plans to Issue $59 Billion Debt to Build Cash

Updated on

The U.S. Treasury Department said it is foregoing its previous plans to pay down debt this quarter and will borrow more to build higher cash reserves.

The Treasury will issue $59 billion in net marketable debt in the April-June period, instead of the $7 billion paydown projected three months ago, with an end-of-June cash balance of $260 billion, the department said Monday in Washington. That’s $110 billion more in cash than projected in February. Net borrowing is projected at $66 billion in the July-September period, with $175 billion in cash Sept. 30.

The Treasury believes it’s prudent to hold a bigger cash buffer, as recommended by its borrowing advisory committee, a Treasury official told reporters Monday. Bankers advising the department have been encouraging such protection against disruptive events such as superstorm Sandy or Sept. 11, 2011, terrorist attack.

“It does reduce Treasury’s operating risks,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

The projected balance of $260 billion would be the highest since November 2010.

The Treasury said it issued net marketable debt of $141 billion in the first three months of the year, less than the February projection of $155 billion.

“The decrease in borrowing was driven primarily by higher receipts partially offset by higher outlays,” Treasury said in a statement today.

Previous Estimate

The cash balance was $100 billion at the end of January-March period, in line with the previous estimate.

Treasury officials said previously that any increases in the cash cushion would be unrelated to possible future standoffs with Congress over raising the government’s debt limit.

The department is employing special measures to keep borrowing within the limit as it waits for Congress to either increase or suspend the ceiling. In the past, lawmakers postponed the agreement over the threshold until the last minute, bringing the nation close to default in October 2013 and August 2011.

Today’s estimates precede the department’s quarterly refunding announcement on May 6, when the sizes of note and bond sales are released.

(An earlier version of this story was corrected to include the word billion after $100 in the eighth paragraph.)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE