U.S. Still Faces Uncertain Borrowing Needs Due to Covid-19, Treasury Says

By Kate Davidson

WASHINGTON -- The Treasury Department on Wednesday announced few changes to its regular debt issuance schedule for the current quarter, while emphasizing the government continues to face uncertain and sizable borrowing needs due to the coronavirus pandemic.

The agency intends to maintain the size of nominal coupon auction sizes this quarter, after ramping up auction sizes last year to accommodate a surge in government spending to combat the pandemic and cushion the U.S. economy.

"Treasury believes that these changes have created sufficient capacity to address near-term projected borrowing needs," said Brian Smith, the Treasury's deputy assistant secretary for federal finance, in a statement on the agency's quarterly borrowing needs.

The Treasury also will continue to gradually increase auction sizes for Treasury inflation-protected securities, as announced in November, boosting the size of those auctions by $10 billion to $20 billion over the 2021 calendar year.

The borrowing plans are consistent with expectations from the vast majority of primary dealers and recommendations from a Treasury borrowing advisory committee, a senior Treasury official said Wednesday morning. The plans also preserve flexibility for Treasury, in light of potential uncertainty about government spending and the possibility for another economic relief package in Congress, the official said.

The Treasury said earlier this week the government intends to borrow less in the coming quarter than previously estimated, in part because it started the year with much more cash than expected. Agency officials had assumed government spending would pick up late last year after Congress passed another economic relief package, but a deal over the measure came late in December, and much of the spending has now shifted to this year.

The Treasury also intends to draw down its large cash balance -- which totaled $1.7 trillion at the end of December -- over the coming quarters, as the government approaches a key deadline for its borrowing limit.

Mr. Smith in his statement Wednesday said the government would continue to take a cautious approach to its cash balance, and said the path or extent of any decline would depend on the pace of government spending and the possibility of another coronavirus relief package.

Congress suspended the limit, or debt ceiling, until July 31, 2021, after which time the Treasury will be unable to tap bond markets to raise new cash. A Treasury borrowing advisory committee strongly urged Congress to suspend the borrowing limit before the July deadline.

Write to Kate Davidson at [e-mail]

Corrections & Amplifications

This was corrected at 9:18 a.m. ET because the original incorrectly said Congress suspended the U.S. borrowing limit until July 21, 2021. The limit is suspended through July 31, 2021.

(END) Dow Jones Newswires

02-03-21 0848ET