US TSYS/SUPPLY: Tsy Cash Level Assumptions Subject To Downside In Reality

To put Treasury's new financing projections into context, the Jan-Mar borrowing requirement of $815B would be the largest (nominal $) of any Q1, even though the financing requirement of $520B is not as high as the $656B in Q1 2023. The difference between the two dynamics is due to the large drop in the cash balance in Q1 2023 ($269B), compared with the anticipated cash raise of $128B in that quarter.

• As for why Treasury sees such a sharp drop-off in Apr-Jun borrowing, to $123B - along with a financing need that is negative (-$20B) - it's not that unusual. Q2 2024 saw a $234B borrowing requirement on a net negative financing need (-$9B), with Q2 2022 similar.
• As such it's probably the case that Treasury is expecting a bumper tax take in April 2025 (though it's hard to know for sure). It also suggests that even if this proves ambitious, the risks to actual marketable borrowing vs the projection are probably to the downside, given the cash level at end-Q2 is likely to be lower than the projected $850B. Those $850B figures should be considered placeholders given that they don't reflect the likelihood of cash being drained so long as Treasury is confined by the debt limit that is currently in place.
• We may get a better sense of Treasury's current thinking on the debt limit in Wednesday's refunding announcement.

Overall the release reflects the fact that there is a new Treasury Secretary and regime in town, and that may also be influencing the relatively benign outlook for borrowing - here's the economic outlook in this quarter's Economy Statement for the Treasury Borrowing Advisory Committee, which notably highlights that the Trump administration looks to reduce deficits: 

• "Although data have suggested American economic resilience, the economy largely has been propped up by government largesse. While labor markets appear strong, job growth has been predominantly limited to industries subsidized by the public sector... As the Administration implements its agenda of slashing regulations, lowering the joint burdens of high inflation and high taxes, and freeing capital by reducing federal deficits, the private sector is primed to be the driving force of the next great economic expansion."
• Versus November's refunding: "The American economy remains strong, with a healthy labor market and easing inflation. Just a few years ago, economic forecasters did not expect that such a combination of persistently strong growth and moderating inflation was likely—or, among many cases, even possible. But over the past three years, the Biden-Harris Administration has made significant investments to reduce costs, boost economic potential, and make our economy more resilient to risks. The outperformance of the American economy thus far in 2024 shows these investments are paying off."