The US government will borrow $618bn this quarter, and $800bn in the next

What happened

The US Treasury said on 2 November that it expects to borrow $618bn from markets in October–December, $10bn less than it estimated in August. The reduction came entirely from a larger cash balance at the start of the quarter. Excluding that, its borrowing needs were $24bn higher than expected, because of weaker net cash flows. It assumes a cash balance of $850bn at the end of December.

For January–March 2027, it projects $800bn of borrowing, assuming $1 trillion in cash at the end of March. In July–September it borrowed $742bn, slightly more than projected.

Why the government borrows, and what the cash buffer does

The Treasury borrows to cover the gap between what the government spends and what it collects in taxes, and to repay maturing debt it cannot pay from cash. It also keeps a cash buffer at the Federal Reserve, like a current account, so it can pay bills on time. When that buffer starts higher, less needs to be borrowed in the quarter; when the Treasury wants a bigger buffer, it borrows more. That is why the quarterly numbers can move even when the deficit itself does not.

Why the mix of debt matters for yields

The Treasury can borrow by selling short-term bills, which mature within a year, or longer notes and bonds of up to 30 years. Selling more long bonds means more supply in the market investors use to price mortgages and company loans, which can push long-term yields up. The US 10-year yield was 4.94% on 30 October, close to its highest levels in years.

On Wednesday 4 November the Treasury publishes its refunding plan, which says whether it will change the size of its regular auctions. Analysts expect any cuts to fall on 20- and 30-year bonds and any increases on two- to seven-year notes, according to Reuters. The Treasury has also raised the maximum size of its buybacks of older long-dated debt to $6bn per operation, from $2bn, which supports trading in those bonds.

Update, 5 November: The refunding plan left auction sizes unchanged, with $125bn of 3-, 10- and 30-year debt to be sold next week. The Treasury now expects to keep coupon and floating-rate auction sizes unchanged "for the next several quarters", dropping the words "at least", which analysts read as opening the door to changes in the first half of 2027. It also plans buybacks of up to $70bn across the curve, Reuters reported.

Where it sits in the chain

Government finances feed Link 4, bond yields. The amount and the maturity of what the Treasury sells shape the yield curve, and US yields set the benchmark for borrowing costs around the world.

What to watch

• The refunding statement on 4 November, and any change in auction sizes.
• Long-term Treasury yields after the midterms and the jobs report.
• The government's monthly budget statement, for the trend in the deficit.