By Gertrude Chávez-Dreyfuss
NEW YORK, May 4 (Reuters) – The U.S. Treasury said on Monday it now expects to borrow $189 billion in the second quarter, $79 billion more than it projected in February, with the increase largely due to weaker-than-expected cash flows, which were partially offset by higher cash at the start of the quarter.
The Treasury said the forecast assumes a cash balance of $900 billion at the end of June. Excluding the benefit of the larger-than-expected opening cash balance, second-quarter borrowing would be $122 billion higher than the February estimate.
Looking ahead, the Treasury said it expects to borrow $671 billion in the third quarter and end September with a cash balance of $950 billion.
For the first quarter, the Treasury said it borrowed $577 billion in privately held net marketable debt, ending March with a cash balance of $893 billion. In February, it had projected $574 billion in loans and a cash balance at the end of March of $850 billion.
The slightly higher leverage reflected the higher-than-expected cash balance at the end of the first quarter, partly offset by stronger cash flows. Excluding the difference in the cash balance, actual borrowing was $40 billion lower than forecast.
Bond investors are now focused on Wednesday’s refund announcement, which will outline the Treasury’s funding plans for the second and third quarters.
The Treasury is widely expected to leave note and bond auction sizes unchanged for the ninth consecutive quarter. However, the prospect of large tariff refunds has increased attention on whether and when the government can boost longer-term debt issuance.
Up to $166 billion could be returned to importers.
JP Morgan estimates that about $127 billion of that total will be eligible for electronic refunds, with the first significant payments likely to arrive in June and July after a 60- to 90-day processing period. The bank expects about $30 billion in repayments to be paid in 2026 and the remaining $90 billion in approximately 2027.
Morgan Stanley said in a research note that the balance of risks points to coupon increases occurring after its February 2027 base, likely concentrated in shorter-term maturities, particularly in the five- to seven-year sector.
(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Nick Zieminski and Matthew Lewis)