US Treasury Lifts Third-Quarter Borrowing Estimate to 739 Billion Dollars
The United States Treasury expects to borrow 739 billion dollars in privately held net marketable debt in the third quarter, assuming an end-September cash balance of 950 billion dollars, and 628 billion dollars in the fourth quarter, assuming an end-December cash balance of 850 billion dollars.
The end-June cash balance came in at 919 billion dollars, against the 900 billion dollars assumed in May. Second-quarter borrowing was 190 billion dollars, 1 billion more than the 189 billion estimated in May; excluding the higher-than-assumed end-June cash balance, it was 18 billion lower. The third-quarter estimate is 68 billion dollars higher than announced in May, mainly because of lower projected net cash flows, partly offset by the higher starting cash balance; excluding that cash balance, it is 87 billion higher.
The headline number overstates how much new money is actually being raised, because part of it funds the cash balance rather than the government. On our calculation, the assumed increase in cash from 919 billion at end-June to 950 billion at end-September absorbs 31 billion of the 739 billion, leaving 708 billion applied to funding the government. The fourth quarter runs the other way: 628 billion of borrowing plus a 100 billion drawdown of the cash balance from 950 to 850 gives 728 billion applied. Across the second half, borrowing of 1,367 billion dollars supports applied funding of 1,436 billion.
Treasury borrowing and applied funding, second half of 2026. Applied funding is our calculation.
| Third quarter | Fourth quarter | Second half | |
|---|---|---|---|
| Estimated borrowing | 739 | 628 | 1,367 |
| Assumed end-quarter cash | 950 | 850 | – |
| Change in cash | +31 | -100 | -69 |
| Applied funding, our calculation | 708 | 728 | 1,436 |
Figures in billions of dollars.
The market response is the part worth measuring rather than asserting. An upward revision to borrowing is conventionally expected to push long yields up relative to short ones, because the additional supply lands at the long end and because it raises the compensation investors require for duration. That is not what happened.
Treasury yield curve spreads, in basis points, around the announcement. Spreads are our calculation from the published constant maturity yields.
| Date | 30-year less 2-year | 10-year less 2-year |
|---|---|---|
| 29 July | 98 | 45 |
| 30 July | 98 | 45 |
| 31 July | 99 | 47 |
| 3 August | 98 | 45 |
On our reading, the curve did not steepen. Both spreads finished where they started, within a basis point, across the announcement window. Yields moved, but they moved together. A 68 billion dollar upward revision to a quarterly borrowing estimate did not move the term premium, which suggests the number was inside what the market had already assumed rather than outside it.
The rate setting behind the curve is unchanged: the Federal Reserve held its target range at 3.50 to 3.75 percent on 29 July on a 9 to 3 vote, and the effective federal funds rate printed at 3.63 percent on 31 July.
Treasury’s accompanying description of the economy attributes 2.1 percentage points of second-quarter growth to consumption and 1.2 points to business fixed investment, against minus 1.0 from net exports. On our calculation those three named components sum to plus 2.3 points against a headline of 1.5 percent. Treasury assigns the remainder to residential investment, which added 0.1 points, and to inventories and government spending, which together subtracted 0.8 points; the components as Treasury gives them sum to 1.6 points, 0.1 above the headline, consistent with rounding. Two consistency checks on the named components pass: 2.1 divided by the 3.2 percent growth rate of consumption implies a consumption share of output of 65.6 percent, and 1.2 divided by 8.4 percent implies a business fixed investment share of 14.3 percent, both plausible.
One warning on the price figures quoted alongside. The personal consumption expenditures measures cited on a twelve-month basis and those cited on a quarterly annualised basis are not comparable with one another and should not be set side by side as though they described the same period at different points.
Why it matters: Borrowing estimates are the mechanism by which fiscal decisions reach the bond market, and the size of the headline invites the conclusion that supply is about to overwhelm demand. The composition argues otherwise on two counts. Part of the third-quarter figure funds the cash balance rather than the deficit, and the curve’s refusal to steepen says the market had already priced a number of roughly this size. The pressure point, if there is one, is not the estimate but the maturity mix chosen to fund it.
Looking ahead: The quarterly refunding statement, which sets the actual auction sizes and the maturity distribution, is the release that matters and is due at 8:30 a.m. Washington time on 5 August. That, not the borrowing estimate, is where any change in long-end supply will appear.
Correction, 3 November 2026: an earlier version said second-quarter borrowing exceeded the May estimate by 87 billion dollars, 68 billion of it from factors other than the cash balance. Treasury reported second-quarter borrowing of 190 billion dollars against the 189 billion estimated in May; the 68 billion and 87 billion figures are the third-quarter estimate’s increase over May, with and without the higher starting cash balance. The earlier version also described the rest of second-quarter growth as unstated and included residential investment in the minus 0.8 points; Treasury’s economy statement gives residential investment as adding 0.1 points and inventories and government as subtracting 0.8 points together.
Sources: United States Department of the Treasury; Federal Reserve; Bureau of Economic Analysis.
