US TSYS/SUPPLY: Borrowing Requirements Upped In Line With MNI Expectations
Treasury's estimates of privately-held net marketable borrowing for the July - September 2025 and October - December 2025 quarters released Monday were almost exactly in line with MNI's estimates (Sources and Uses Table here - PDF).
- We would characterize the current quarter borrowing estimates as slightly on the high side of the median analyst expectation, with the latter quarter fairly close to expectations given what is usually a wide range for the further-out quarter. As such this should have little to no impact on expectations for Wednesday's Refunding announcement.
- For the Jul-Sep quarter, Treasury expects a $525B financing need (MNI expected $532B) with a $1007B borrowing requirement (MNI expected $1000B), with cash rising $393B to $850B by quarter-end (in line with consensus). Analyst borrowing requirement estimates for this quarter ranged from $942B - $1,087B.
- This represents a borrowing estimate $60B higher than announced in April's refunding, when excluding the cash raise that is now expected following the lifting of the federal debt limit ($453B more borrowing this quarter on $393B more cash by end-quarter).
- For the Oct-Dec quarter, Treasury expects a $494B financing need (MNI expected $525B) with a $590B borrowing requirement (MNI expected $600B), with cash remaining at $850B at quarter-end. Analyst borrowing requirement estimates for this quarter ranged from $534B - $726B.
- Note that regarding the April-June quarter, "excluding the lower than assumed end-of-quarter cash balance, actual borrowing was $56 billion lower than announced in April".
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
