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Treasury trims quarterly borrowing estimate, but still sees $1.47-trillion annual deficit

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The U.S. Treasury on Monday said it expected to issue a net $350 billion in marketable debt in the current quarter, $26 billion less than it projected in May.

The decline in the current-quarter borrowing figure was credited to ‘lower outlays and a higher-than-announced beginning-of-quarter cash balance,’ the agency said in a statement.

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But the new estimate still is more than the $344 billion in net borrowing last quarter. And borrowing in the final quarter of the year is expected to rise again, to $380 billion, Treasury said.

Alan Krueger, the agency’s chief economist, said in a separate statement that the total federal budget deficit would be a record $1.47 trillion in the current fiscal year (which ends Sept. 30), or about 10% of the country’s gross domestic product.

That would be just slightly above the $1.41 trillion deficit of fiscal 2009, the previous record high.

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‘Partly as a result of improving economic conditions, the federal deficit is expected to fall over the next several years, although achieving fiscal sustainability over the longer term remains a major challenge,’ Krueger said. The Obama administration expects the deficit to decline slightly, to 9.2% of GDP, in fiscal 2011.

Of course, despite the massive increase in borrowing over the last two years to pay for federal spending as tax receipts dived with the economy, the Treasury has had no trouble attracting risk-averse investors to its bills, notes and bonds. Financial markets haven’t been willing to force any discipline on Uncle Sam.

Market yields on Treasury securities were mostly higher on Monday as a surge in stocks worldwide lured some money out of bonds. But the benchmark 10-year Treasury note yield remained below 3%, at 2.97%, down from nearly 4% in early April.

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-- Tom Petruno

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