The U.S. Treasury today will announce
plans to borrow more money this quarter than ever before as the
federal budget heads for a record shortfall, according to
economists at Wall Street’s biggest bond trading firms.
“Borrowing is going up sharply,” said Stephen Stanley, an
economist at RBS Greenwich Capital in Connecticut, who met with
Treasury officials Friday to discuss debt management. “We were
already running a large deficit because of the slow economy and
defense spending, and now we have new tax cuts.”
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For the three months through September, the Treasury may
target net borrowing of $135 billion, based on the median forecast
of 14 of the 22 firms that trade with the Federal Reserve, known
as primary dealers. Bond yields, already on the rise in
anticipation of economic strengthening, may increase further in
response to the demand for more credit.
The effects of the widening deficits are rippling through the
economy. Higher spending for social support programs and lower
taxes are intended to help spur growth in the short-term, the
White House says.
Bloomberg News
