The US Treasury to Secure $1.37 Trillion in Borrowings Within 6-Month Period

October 29, 2024 TruthUSA

The national debt is on track to hit $36 trillion in the near future.

The U.S. Department of Treasury revealed on Oct. 28 that the federal government is planning to borrow $1.369 trillion over the next six months.

As per the latest Marketable Borrowing Estimates, the Treasury aims to borrow $546 billion from October to December, which is $19 billion lower than initially projected in July due to various factors.

Between July and September, Washington borrowed $762 billion, surpassing the projected amount by $22 billion.

In the January to March quarter, the Treasury plans to borrow $823 billion, with expectations of debt-ceiling negotiations and potential actions by Congress to raise or re-suspend the debt limit.

If current predictions hold true, the borrowing in the first quarter of 2025 would be the largest nominal amount for that period.

The government released these projections ahead of its quarterly refunding announcement on Oct. 30, where it will outline its strategies for issuing long-term debt.

In recent times, the U.S. government has issued trillions in short-term debt securities to manage increasing budget deficits and interest payments.

The federal deficit for fiscal year 2024 was $1.83 trillion—the third highest ever recorded.

Although Treasury Secretary Janet Yellen mentioned she isn’t timing the financial markets, there have been suggestions that the current administration might be waiting for interest rate cuts by the Federal Reserve, as proposed by Sen. Bill Hagerty.

Private estimates suggest that Treasury bills will make up 40 percent of net Treasury issuance.

Weak domestic demand has posed challenges for the Treasury, with foreign investors dominating recent auctions.

The 5-year $70 bond auction recorded a higher-than-expected yield of 4.138 percent due to sluggish investor demand, with around 77 percent purchased by international investors.

Last year, the Treasury Borrowing Advisory Committee concluded that issuing short-term bonds could be more cost-effective for the government compared to selling medium- and long-term debt.

Despite expectations of lower U.S. government bond yields following Fed interest rate cuts, the Treasury market has seen significant fluctuations recently.

The benchmark 10-year yield has risen over 60 basis points since hitting a low on Sept. 16, reaching as high as 4.3 percent on Oct. 28—the highest level since July.

This surge in yields has been attributed to market reactions following the Federal Reserve’s interest rate reduction in September.

Federal Reserve Chairman Jerome Powell’s speech is seen on a television screen as traders work on the New York Stock Exchange floor during morning trading on Aug. 25, 2023. (Michael M. Santiago/Getty Images) — Federal Reserve Chairman Jerome Powell’s speech is seen on a television screen as traders work on the New York Stock Exchange floor during morning trading on Aug. 25, 2023. Michael M. Santiago/Getty Images

The Federal Reserve announced a 50-basis-point interest rate cut in September, the first in over four years, with more rate cuts expected over the next two years.

Fed Chair Jerome Powell has indicated a cautious approach to lowering rates further.

According to Treasury data, the national debt surpassed $35.8 trillion on Oct. 24, climbing $1.2 trillion since the start of the year.

The International Monetary Fund (IMF) warned in its latest October Fiscal Monitor that U.S. debt and deficit levels are unlikely to stabilize by 2029, with rising debt projected to reach almost 134 percent of GDP that year.

The IMF’s short-term outlook includes a forecast of the budget deficit remaining above 6 percent of GDP until at least 2029.

Both IMF economists and analyst Mark Malek have expressed concerns about the lack of concrete plans from presidential candidates to address the growing national debt.

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