Decreasing Anxiety in Bond Markets
(CoinUnited.io) — Major investment banks are coming together to suggest that the borrowing needs of the US government are likely to diminish by June, providing some relief to the bond markets. Concerns about the government’s fiscal deficit had caused anxiety among investors towards the end of 2023. However, the current round of announcements by the government is not causing as much worry as before. Last year, uncertainty regarding the purchase of government debt and the Federal Reserve’s stance on interest rates contributed to the nervousness in the bond market.
Previous Borrowing Estimates
The worries started in July when the Treasury announced a staggering $1.007 trillion estimate for borrowing in the third quarter of last year. This led to further anxiety before the agency’s next announcement in October, which overshadowed the Federal Reserve’s meeting. The fourth-quarter borrowing estimate came in below expectations at $776 billion, reducing concerns in the bond market.Now, Wall Street is closely monitoring the Treasury’s estimate of $816 billion for borrowing needs in the first quarter and eagerly awaiting news about the second quarter. Deutsche Bank strategists, Steven Zeng and Matthew Raskin, among others, predict a downward revision for the first quarter, expecting borrowing needs to drop to $797 billion. Additionally, for the April-June period, they anticipate a further decrease to $472 billion.At Jefferies, economist Thomas Simons also anticipates a downward revision for the first quarter, estimating borrowing needs at $800 billion. Simons projects borrowing of $60 billion in the second quarter, taking into account a cash balance of $750 billion at the end of the period. This estimate, lower than that of Simons’ peers, acknowledges the uncertainty surrounding it and the boost that the government is likely to experience from tax revenue during April to June.In late morning trading in New York, the S&P 500, Nasdaq Composite, and Treasury yields were slightly higher.
Expectations for Treasury’s Announcement
The upcoming Treasury announcement has garnered significant attention from a wide range of market participants. JPMorgan Chase & Co. strategists, Jay Barry and others, anticipate the announcement to be a relatively lower volatility event for rates markets than the previous two events. They believe that, considering the firm forward guidance offered in November, the Treasury may not want to be in the spotlight again.JPMorgan expects the borrowing needs for the second quarter to decrease to $263 billion, assuming a cash balance of $750 billion to $775 billion from March to June. This is lower than their revised estimate of $855 billion for the first quarter, which is higher than the Treasury’s initial estimate.