By Kate Davidson 

WASHINGTON -- The Treasury Department said Wednesday it expects the government's borrowing needs to moderate somewhat this quarter but remain elevated amid an unprecedented surge in federal spending to combat the coronavirus pandemic.

The Treasury plans to increase auction sizes across all securities, particularly 7- and 10-year notes and 20- and 30-year bonds, as part of a broader effort to shift government financing to longer-dated maturities.

Treasury officials also said they are taking a precautionary approach to government outflows, and expect to maintain a higher cash balance for the foreseeable future until the uncertainty around government outflows diminishes. The Treasury on Monday estimated the cash balance would fall to $800 billion by the end of the current quarter.

"The extent of the decline will depend on several uncertain factors, including the pace of outflows under current law and the potential for additional legislation," Brian Smith, Treasury's deputy assistant secretary for federal finance, said in a statement Wednesday.

The Treasury has borrowed a record $1.462 trillion since May 1, as the government pumped billions of dollars to households and businesses to help cushion the economy through emergency small-business loans, expanded jobless benefits and aid to state and local governments.

Officials estimate net marketable borrowing of $947 billion through the end of the current quarter, compared with $2.753 trillion from April through June, though that depends on the size of the economic relief package that the White House and Congress is still negotiating. The Treasury on Monday estimated total borrowing for fiscal year 2020 will total $4.5 trillion -- more than triple last year's $1.28 trillion, and well above borrowing during and after the 2008 financial crisis.

Treasury officials said their estimates assume another round of fiscal stimulus will boost borrowing needs by $1 trillion through the end of the year. Republicans have said they want to cap additional spending at $1 trillion, while Democrats are pushing for a more sweeping measure that would include more money for states and extend the extra $600 weekly jobless payments through the end of the year.

To keep up with the government's elevated borrowing needs, Treasury officials said they plan to boost auction sizes of 2-, 3- and 5-year notes by $2 billion a month this quarter, and $3 billion a month for the 7-year note. Auction sizes for the 10-year note will increase by $6 billion, and 30-year bond auction sizes will rise by $4 billion starting this month.

Officials also said they saw strong demand and positive market feedback for the new 20-year bond, which launched in May, and said they plan to increase auction sizes by $5 billion over the current quarter.

Auctions for floating rate notes will increase modestly, Treasury officials said, while auction sizes of Treasury inflation-protected securities will remain unchanged.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

August 05, 2020 09:21 ET (13:21 GMT)