The U.S. Treasury Department has significantly raised its borrowing expectations for this quarter, far exceeding market expectations.

The US Treasury recently raised its expected net borrowings for the second quarter of 2025, exceeding the high end of most market strategists' previous forecasts. The Treasury expects the US government's net borrowings to reach $514 billion from April to June, far exceeding the initial estimate of $123 billion announced in February. Net borrowings refer to the difference between total borrowing amounts and amounts repaid on maturing debts. A senior Treasury official stated that due to restrictions on the federal debt ceiling, the Treasury was unable to maintain a higher balance in the Treasury General Account (TGA) as expected, leading directly to the increase in borrowing demand this quarter. As of the end of March, the TGA balance was $406 billion, much lower than the $850 billion projected by the Treasury in February. This means that the government used more cash than expected at the beginning of the year. Typically, when the Treasury starts a new quarter with a lower cash balance, it increases the borrowing amount. In addition, changes in expected tax revenue also play an important role in determining the net borrowing amount. The current borrowing estimate assumes that the TGA balance will be restored to $850 billion by the end of June. Most market strategists did not anticipate such large-scale quarterly borrowings. For example, Deutsche Bank strategist Steven Zeng estimated borrowing at $507 billion; French Industrial Bank strategist Adam Kurpiel predicted $339 billion; and JPMorgan Global Rate Strategy Director Jay Barry predicted $255 billion. Looking ahead to the next quarter, the Treasury also expects net borrowings for July to September 2025 to reach $554 billion. It is worth noting that these borrowing forecasts are used by the market to measure future debt issuance sizes, but the actual borrowing amount still depends on whether Congress can timely raise the debt ceiling. If the debt ceiling is not raised as scheduled, the actual borrowing amount will be lower than currently expected. On Wednesday, the Treasury will also disclose more important details - how new debt will be allocated between short-term and long-term securities. This allocation will have a significant impact on the 10-year US Treasury bond yield, which in turn affects the costs of mortgages and other loans for consumers and businesses. As of last Friday, the 10-year bond yield closed at 4.267%, down 5.9 basis points for the week. Lower yields mean higher prices for existing bonds, partially reversing the downward trend in bond prices since April 2 when Trump proposed a large-scale tariffs plan. Nevertheless, the current yield is still far above the low of 3.622% set in September last year. This year, except for a brief drop below 4% to 3.99% on April 4, the 10-year bond yield has remained above 4%. Factors driving the persistent high yield include uncertainty over tariff policies, government policy volatility, and market concerns about whether the US can sustainably address its $36 trillion national debt.