Wednesday, April 24, 2024

Yellen: June 5th is the X-date when we run out of cash, default


Treasury Secretary Janet Yellen said her department estimates it will run out of money by June 5 if lawmakers fail to raise or suspend the US debt ceiling.

“Based on the most recent available data, we now estimate that if Congress does not extend or suspend the debt ceiling by June 5, the Treasury will have insufficient resources to meet the government’s obligations,” Yellen said. said in its latest letter on the potential to lawmakers on Friday. Government lapse time.

The Treasury chief said his department would be able to make more than $130 billion in scheduled payments in the first two days of June, including payments to veterans, Social Security and Medicare recipients.

“These payments will leave the Treasury with very few resources,” she said.

The new guidance was notably the previous limit Treasuries had given for a possible default of one day.

Earlier, Yellen said Monday that her department could run short of cash as early as June 1 and would be “highly likely” to exhaust all of its resources by “early June.”

Now Yellen is saying the Treasury may make it through Friday, June 2, but is unlikely to meet all of its obligations by Monday, June 5.

Premium investors seeking to hold US paper, which is most at risk of default if Congress and the White House fail to strike a deal, continued to retreat on Friday, with yields falling below 6%.

The latest letter comes as White House negotiators and Republican lawmakers are getting closer to a budget deal. Republicans have vowed not to raise the nation’s statutory borrowing limit unless Biden agrees to cut the budget.

The Treasury effectively hit the debt limit in January and has since been using emergency accounting measures to prevent a default, which could prove disastrous for financial markets and the economy.

The Treasury’s cash balance fell to $38.8 billion on Thursday, the lowest since 2017, according to data published on Friday. The department had only $67 billion in extraordinary measures left until May 24 to help pay the government’s bills, the department said in a statement Friday.

Remaining emergency resources totaling $335 billion left over from authorized measures that were available to prevent the US government from running out of borrowing room under the statutory debt ceiling are down from about $92 billion on May 17.

– With assistance from Alexandra Harris, Ben Holland, Kate Davidson and Margaret Collins.