One quarter ago, when reporting on the Treasury’s latest marketable debt issuance forecast, we pointed out something striking which sparked a historic selloff in Treasuries over the next 90 days: the US Debt Tsunami had Begun as the “US Was Set To Sell $1 Trillion In Debt in Q2, 2nd Highest In History, As Budget Deficit Explodes“, while the forecast debt sale for Q3 was also an eye-watering $852 billion. The numbers were big enough that even the bond market – which had long since habituated to seeing huge debt issuance forecasts every quarter without batting an eyelid – cracked.
Since then it’s went from bad to worse when as we first noted, the US quickly added some $600 billion in total debt in just one month after breaching the key $33 trillion level. At this rate, the U.S. debt will be $41 trillion in one year.
Which brings us to today when in its latest quarterly Treasury Marketable Borrowing Estimates report (which is always published just before the Treasury’s refunding statement due this Wednesday and which is just as important as the FOMC now that the Treasury is doing the Fed’s work for it, as the surge in yields is the equivalent of 3 rate hikes), the Treasury Department announced its current estimates of privately-held net marketable borrowing for calendar Q4 ’23 and Q1 ’24, (or fiscal Q1 2024, the October – December 2023, and fiscal Q4 2024, the January – March 2024 quarters).
First the good news: unlike last quarter’s shocker, the amount of debt the Treasury expects to issue this quarter is modestly lower, down from $852 Billion to $776 Billion, a drop of $76 Billion which the Treasury attributes to “higher receipts somewhat offset by higher outlays.” That, however, follows the $1.01 trillion in new debt issued in the June-September quarter, which was the second busiest quarter for Treasury sales in history, runner-up only to the $2.8 trillion in debt issued during the Covid quarter of Q2 2020.
Now the bad news: anyone hoping that we could finally see a sustained drop in debt issuance will be disappointed as the Treasury’s forecast for debt issuance in Jan-March ’24 is $816 billion, which would make it the third highest on record.
Here are the details:
- During the October – December 2023 quarter, Treasury expects to borrow $776 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $750 billion. The borrowing estimate is $76 billion lower than announced in July 2023, largely due to projections of higher receipts somewhat offset by higher outlays.
- During the January – March 2024 quarter, Treasury expects to borrow $816 billion in privately-held net marketable debt, assuming an end-of-March cash balance of $750 billion.
Combined, this adds up to $1.5 trillion in new debt for the current and next quarter.