WASHINGTON (MarketWatch) — In another sign of an improving deficit picture, the Treasury on Monday said it expects to pay off debt in the current quarter for the first time in six years.

In a statement, Treasury said it now expects to pay off $35 billion of debt in the April-to-June quarter, compared to an earlier projection, given in February, that it would have to borrow $103 billion.

Treasury Secretary Jacob Lew Getty Images

This will be the first quarter that Treasury has paid off debt since April-to-June period 2007.

The payoff “is emblematic of the turn in budget finances from horrible, to grim, on their way to steadily better,” said Eric Green, global head of rates and foreign-exchange research at TD Securities.

Treasurys on the longer end of the yield curve weakened slightly after the news. The 10-year note US:10_YEAR was yield was up about a half a basis point up on the day at 1.668%, while the 30-year bond yield US:30_YEAR climbed more than 1 basis point on the day to 2.876%. Read MarketWatch’s bond report.

In a statement, Treasury said the changed projection related to higher receipts and lower outlays, but gave no details. The agency also said it expects to have more cash on hand than was previously assumed.

Congress allowed a payroll tax cut to expire at the beginning of the year. This tax hike and continued growth has put more money into the government’s coffers. The sequester, in effect since March, has helped cut outlays.

For the fourth fiscal quarter, which begins in July, the government expects to borrow $223 billion.

This assumes quarter-end cash balances of $75 billion on June 30 and $80 billion on September 30.

The Treasury will announce details of its quarterly refunding on Wednesday. Green said Treasury is expected to hold the refunding auction sizes steady at $32 billion three-year notes, $24 billion of ten-year notes, and $16 billion in 30-year bonds.

“But if there is a surprise, we know where it leans,” Green said.

Over the next two years, the Treasury offering of coupon securities could be $250-$325 billion lower than it has been, Green estimated.

Last week, as a result of the improved outlook for the deficit, the Bipartisan Policy Center pushed back the estimated date that the U.S. might hit its debt ceiling to far as mid-to-late September from the previous estimate of late August to mid-September.

Treasury Secretary Jacob Lew said last week he could not forecast the exact date when Congress has to raise the ceiling to avoid a default.

Republicans in Congress want to use the debt ceiling to seek spending cuts from President Barack Obama.