BRAZIL: BCB Focus Survey – GDP, Selic Forecasts Unchanged

Note that the expected 2nd (calendar year 2025) quarter borrowing requirements are much lower than in Q1 - that's typical and reflective of the large tax receipts in April. Treasury's estimated financing needs will largely reflect their forecasting of those receipts. MNI's estimate of $450B marketable borrowing may this be very much on the high side (we wouldn't be shocked by a figure closer to $0-100B). 

• The debt limit is expected to be sustained for a few quarters, which means that Treasury will have to burn through some of its Treasury General Account cash pile ($745B at end-2024).
• Having targeted $850B by end-March in the previous refunding, we assume that they will maintain that assumption, with only a small dip in the following quarter.
• However expectations differ widely on this, with at least one analyst (Wrightson ICAP) seeing $500B projected cash at end-quarters. A lower/higher cash balance reduces/increases the number in the financing need column, and vice-versa. A “realistic” number would be closer to $300-400B for both quarters.
• The Fed’s expected (per primary dealers/analysts) conclusion to balance sheet runoff by Q3 could help by moderating net financing requirements, but this is very unlikely to be incorporated in Treasury’s assumptions. That means that the projected net financing requirements will be higher than they are expected to be in reality by private sector analysts.
• We could get more color on Treasury’s approach to dealing with the debt limit with Wednesday’s Refunding documents, including on extraordinary measures and cash management strategy, but any discussion is likely to remain tentative and apolitical.
• Note most analysts see the “x-date” by which Treasury risks running out of cash as being around August, though some see risks/core scenario of a much earlier resolution (ie March). More detail is available in our Refunding Preview.

Our full preview of this week's quarterly Refunding went out on Friday (PDF here). While the main Refunding announcement is not until Wednesday at 0830ET, Monday’s Financing Requirements release, at 1500ET, could provide some key insights into how Treasury forecasts fiscal dynamics through the middle of calendar year 2025. 

• The first caveat is that the estimates will likely have to be taken seriously but not literally. Treasury usually makes the assumption that, when applicable, the debt limit (that it is currently constrained by) will be lifted by Congress.
• It also is likely to assume that Fed QT continues to run as usual (around $75B per quarter since the middle of 2024).
• Those assumptions have large implications for the net borrowing requirements and financing needs.
• MNI is very loosely penciling in the following for Monday’s release, and it would probably require a large deviation from these to have a market impact.

• EUR/USD: $1.0250(E873mln), $1.0280(E910mln), $1.0300(E1.2bln), $1.0320(E1.0bln), $1.0375(E1.0bln), $1.0395-05(E1.4bln), $1.0425-35(E2.4bln)
• USD/JPY: Y152.00($500mln), Y154.00($663mln)
• AUD/USD: $0.6275(A$1.6bln), $0.6335-50(A$896mln), $0.6420(A$1.1bln), $0.6595-00(A$2.5bln)