U.S. Treasury Secretary Steve Mnuchin testifies before the House Financial Services and General Government Subcommittee hearing on the Treasury Department's budget on Capitol Hill in Washington, U.S., June 12, 2017. REUTERS/Yuri Gripas

WASHINGTON (Reuters) - The U.S. Treasury said on Monday it expects to borrow $2 billion less during the third quarter than it previously estimated but radically boost the amount it needs in the final three months of the year.

The Treasury Department said in a statement it expects to issue $96 billion through credit markets during the July-September period, assuming an end-September cash balance of $60 billion.

It also expects to issue $501 billion in net marketable debt in the fourth quarter. That estimate “is a massive projected borrowing figure, the likes of which have not been seen since Q4 2008,” investment bank Jefferies said in a note to clients.

“We think that it reflects a combination of replenishing cash balances and bill supply after the debt ceiling constraints are lifted,” Jefferies said, adding that the large increase could in part be due to the anticipation that the Federal Reserve will start shrinking its bond portfolio in September.

U.S. Treasury Secretary Steven Mnuchin urged Congress last week to raise the federal debt limit before lawmakers started their August recess, to avoid higher interest costs to taxpayers and market uncertainty about a potential default. Republican leaders in Congress have begun having bipartisan discussions on the matter in the House of Representatives.

The U.S. government has a statutory limit on how much money it can borrow to cover the budget deficit that results from Washington spending more than it collects in taxes. Only Congress can raise that limit.

During the second quarter, Treasury borrowed $35 billion and ended the period with a cash balance of $181 billion. The Treasury previously estimated borrowing of $26 billion for the April-June period. It said the increase was driven primarily by lower receipts.

Additional details of the Treasury’s quarterly refunding will be announced at 0830 EDT on Wednesday.