27-5-2023 (NEW YORK) In a bid to allow more time for negotiations between the White House and congressional Republicans, U.S. Treasury Secretary Janet Yellen announced on Friday that the earliest date of default on governmental obligations has been extended from June 1 to June 5.
Yellen, in an update letter to congressional leaders, stated, “Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.”
Earlier this week, Yellen had warned that the United States was “highly likely” to default on government obligations by early June, possibly as early as June 1, if the Congress fails to take action on the debt limit. However, the June 1 deadline was met with skepticism from some congressional Republicans and was earlier than estimates by other research institutions.
To address the imminent financial challenges, the Department of Treasury employed an additional extraordinary measure by swapping Treasury securities on Thursday, Yellen noted.
Yellen reiterated the risks posed by the debt limit impasse, emphasizing that Treasury’s borrowing costs would significantly increase for securities maturing in early June.
The ongoing deadlock over the debt ceiling has garnered attention from credit rating agencies. On Wednesday, Fitch Ratings placed the U.S. AAA-rated long-term foreign-currency issuer default rating (IDR) on a “negative watch” due to the continuing impasse.
