The federal government must issue more debt than it expected as cash flow weakens, and ‘the bond market is shouting’

The Treasury Department announced this week that it expects to borrow more than anticipated in ‌the current quarter as incoming cash flow has been weaker than initially projected. The $189 billion now estimated for the April-June quarter is $79 billion more than what Treasury saw in February. And after adjusting for a larger-than-expected cash balance at the start of the quarter, the new borrowing guidance is actually $122 billion higher. With tax-filing deadlines coming in April, the spring quarter typically requires less borrowing than other times of the year. For comparison, the Treasury Department borrowed $577 billion during the January-March quarter and expects to borrow $671 billion July–September quarter. But this filing season, Americans benefited from new tax breaks enacted in last year’s One Big Beautiful Bill Act. In addition, the Supreme Court struck down President Donald Trump’s global tariffs earlier this year, and importers have started getting refunds. As much as $166 billion could be returned. For Mark Malek, chief investment officer at Siebert Financial, the borrowing update is the latest example of the immense supply of fresh debt that the Treasury Department is issuing. In a recent blog post titled “The bond market is shouting,” he pointed out that the Federal Reserve has cut the benchmark rate by 175 basis points since mid-2024, but the 10-year Treasury yield has only dipped by about 35 basis points. “That kind of disconnect is not normal,” Malek warned. “In fact, analysts who have tracked the relationship between Fed policy and long-term yields going back to 1990 describe it as unprecedented. The bond market is not broken. It is sending a message. And if you know how to listen, it is shouting.” The shouting is coming from “bond vigilantes,” a term coined by Wall Street veteran Ed Yardeni in the 1980s, referring to traders who protested huge deficits by selling off bonds to push yields higher. But