(Bloomberg) — The U.S. Treasury lowered its estimate of federal borrowing for the current quarter, while continuing to expect a cash balance of $700 billion at the end of the year, just before for the federal debt ceiling to return.

The Treasury Department said in a statement Monday that it now estimates net borrowing for the October-December period at $546 billion, down from the $565 billion it forecast in July. Officials’ cash flow estimate for the end of the year remained unchanged.

This quarter’s lower borrowing requirement largely reflects a larger stock of cash available at the end of September than the Treasury had anticipated. This was “partially offset by a decline in net cash flow,” the ministry said.

Dealer expectations for the new borrowing estimate had varied before Monday’s release. JPMorgan Chase & Co. strategists predicted a reduction to $529 billion. But the BNP Paribas team predicted an increase to $600 billion, based in part on October and November, which would represent nearly a quarter of the federal government’s annual deficit – a gap that continues to dig in.

The Treasury’s cash balance at the end of September was about $886 billion, compared to the $850 billion that the Treasury had targeted at the end of July. That stock stood at about $834 billion as of Thursday.

Debt limit

For the January-March quarter, the Treasury said it planned to borrow a net amount of $823 billion, assuming a cash balance of $850 billion at the end of the period. This would be the largest nominal borrowing amount on record for this quarter, but not taking into account changes in the cash balance from quarter to quarter.

Officials based those numbers on the assumption that Congress would raise or suspend the debt ceiling again. If lawmakers fail to act – and they generally fail to pass legislation in advance – reinstating the cap then sets off a sequence of maneuvers by Treasury to stay within the limit while continuing to pay the bonds of the government. Officials are providing advice on these maneuvers to Congress as the process unfolds.

“We estimate that Treasury will begin limiting the supply of notes in March 2025 and aggressively reduce the supply of notes in the second quarter,” a team of TD Securities strategists, including Gennadiy Goldberg, wrote in a note. “With a likely increase or suspension of the debt ceiling in the third quarter, Treasury will then increase bond issuance aggressively as the cash balance is replenished to a more normal level.”

Treasury said the year-end cash balance estimate of $700 billion is “also its assumed cash balance at the expiration of the debt ceiling suspension on January 1, 2025.” The actual figure “may differ from this assumption depending on how cash flows evolve towards the end of 2024.”

Wrightson ICAP economist Lou Crandall did not expect officials to give any guidance this week on their specific expectations for the next debt ceiling timetable. He had predicted a borrowing estimate of $540 billion from October to December before Monday’s release.

Today’s report comes ahead of Wednesday’s so-called quarterly repayment announcement, when the Treasury will unveil its long-term debt issuance plans. Bond traders widely expect redemption auctions to total $125 billion for the third straight quarter.

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