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Treasury Reduces Borrowing Thanks to $891B Cash Reserve and Federal Liquidity Program

Treasury Reduces Borrowing Thanks to $891B Cash Reserve and Federal Liquidity Program

Bitget-RWA2025/11/04 02:40
By: Bitget-RWA
- U.S. Treasury cuts Q4 2024 borrowing estimate to $569B, citing $891B cash buffer exceeding $850B target. - Fed plans 2026 Treasury purchases ($35B/month) to stabilize liquidity, reducing market financing pressure. - 10-year Treasury yields fell to 4.1% as fiscal-monetary coordination eases debt concerns. - Supreme Court's Trump tariff review poses revenue uncertainty, potentially altering future borrowing needs.

The U.S. Treasury Department has lowered its fourth-quarter borrowing forecast to $569 billion, which is $21 billion less than what it projected in July. This revision is attributed to a larger-than-anticipated cash balance at the beginning of the October to December timeframe,

. The change is due to the Treasury starting the quarter with $891 billion in its General Account, surpassing the earlier $850 billion estimate, . With this surplus—reaching $1 trillion last quarter, the highest since April 2021—the Treasury has been able to scale back its market borrowing.

Looking ahead to January through March 2026, the Treasury expects to borrow $578 billion, aiming for an $850 billion cash balance at the end of March. This updated path is a shift from the record $776 billion borrowed in the October-December 2023 quarter, highlighting greater fiscal flexibility thanks to steady cash reserves, Barron's observed. The Treasury's borrowing plans are also shaped by anticipated revenues such as tariffs, though some legal uncertainties remain. The Supreme Court's forthcoming decision on former President Donald Trump's tariff measures could affect revenue projections and, in turn, future borrowing, Barron's added.

Treasury Reduces Borrowing Thanks to $891B Cash Reserve and Federal Liquidity Program image 0

The Federal Reserve has also indicated its influence on borrowing conditions. After three years of reducing its balance sheet, the Fed intends to restart Treasury purchases in early 2026, injecting $35 billion into the market each month to help maintain liquidity,

. This initiative is designed to support financial stability rather than spur economic growth, and is part of broader efforts to address concerns about debt sustainability. Experts point out that the Fed’s actions could help keep Treasury yields in check, which have dipped below 4.1% as confidence in the Fed’s supportive approach grows.

The Treasury’s revised borrowing outlook also underscores the connection between fiscal and monetary policy. While the department’s fourth-quarter projection is based on an $850 billion cash reserve, the Fed’s upcoming Treasury purchases may further relieve market strain. For example, starting December 1, the Fed will reinvest $16 billion per month from mortgage-backed securities into Treasury bills, which will help absorb part of the anticipated $648 billion increase in T-bill issuance in 2026,

.

Investors continue to monitor the broader impact of these policy moves. The U.S. borrowing trajectory, combined with the Fed’s liquidity support, is influencing market sentiment. Analysts highlight that the 10-year Treasury yield has narrowed to 4.1% from 4.8% in January, signaling less concern about supply pressures. Nonetheless, uncertainties remain, especially regarding the Supreme Court’s upcoming tariff decision and its possible fiscal consequences.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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