U.S. Sees First Debt Reduction Since 2007 as Revenue Rises
Apr 29, 2013 1:41 PM PT By Meera Louis – bloomberg
The U.S. Treasury Department (USGG10YR) projected it will reduce government debt this quarter for the first time in six years as tax receipts exceed forecasts and spending diminishes.
The pay-down in net marketable debt was estimated at $35 billion in the April-June period, compared with a projection three months ago for net borrowing of $103 billion, the department said in a statement today in Washington. Treasury officials also see net borrowing of $223 billion in the quarter starting July 1. The estimates set the stage for the department’s quarterly refunding announcement on May 1, when debt issuance plans will be released.
A sustained economic expansion and across-the-board spending cuts known as sequestration may help deliver the first net decline in debt since 2007, when the government lowered borrowing by $139 billion before the global financial crisis spawned the worst recession since the 1930s. While the economy’s strength is helping boost tax revenue, total U.S. public debt outstanding is approaching $17 trillion.
“This is a substantial revision,” said Thomas Simons, a government debt economist at Jefferies LLC in New York. Still, “it is possible that Treasury will take a wait-and-see approach in evaluating the sustainability of the recent surge in tax receipts before making adjustments” to debt auctions, he said.