[ad_1]
U.S. Treasury Secretary Janet Yellen on Wednesday expressed concerns about how financial markets are getting hit by debt-limit angst, and she said it was โalmost certainโ that the federal government wonโt be able to meet all of its obligations in early June if Congress doesnโt raise the ceiling for borrowing.
She added that she aimed to provide a fresh update on the debt-limit deadline โpretty soon.โ
โI will plan to update Congress shortly and try to increase the level of precision,โ she said, as she responded to questions about Washingtonโs debt-ceiling standoff during The Wall Street Journalโs CEO Council Summit.
On Monday, Yellenย warned in a letterย that itโs โhighly likely that Treasury will no longer be able to satisfy all of the governmentโs obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.โ That echoed warnings that she offeredย last weekย and onย May 1.
In talking about markets, Yellen said there could be pain even with a deal.
โOne of the concerns I have is that even in the run-up to an agreement, when one does occur, there can be substantial financial-market distress. Weโre seeing just the beginnings of it,โ she said. โBut if you go back to 2011, remember that U.S. Treasurys were actually downgraded. The stock market fell almost 20%.โ
In August 2011, lawmakersย approved an increase to the limit just hours before a potential government default. Within days, theย U.S. lost its triple-A credit ratingย from S&P for the first time in history, with the ratings agency saying the American political system had become less stable.
DJIA,
closed lower Wednesday as concerns about the impasse in the debt-ceiling talks appeared to undermine support for equities.
When asked Wednesday about whether the Treasury Department is taking part in market participantsโ preparations for a possible missed payment, Yellen said her department is โcommitted to not having missed paymentsโ and โnot involved in planning for what happens if thereโs a default.โ
Related: How would the Fed react to a debt-ceiling breach? Hereโs whatโs in the central bankโs playbook
And see: A debt-ceiling deal will spark a new worry: Who will buy the deluge of Treasury bills?
When asked about potentially prioritizing certain payments if the debt limit isnโt raised, the Treasury secretary said prioritization is โnot really something thatโs operationally feasible.โ
โI am not going to get into what exactly is possible and what is not possible, because I think the most important thing to recognize is that we must raise the debt ceiling,โ she said. โThere isnโt any outcome that is acceptable. We will default on some obligation, and thatโs really not an acceptable state of affairs.โ
House Speaker Kevin McCarthy told reporters on Wednesday that he was hopeful for progress in negotiations. โI firmly believeโ a deal will be reached on the debt ceiling, he said, even as he said differences remain. He repeated a demand for the U.S. government to spend less than it did last year.
White House press secretary Karine Jean-Pierre said the latest talks between McCarthyโs deputies and President Joe Bidenโs team started around noon Eastern Wednesday and were still continuing as of around 2:45 p.m.
Democrats and Republicans may end up making a deal over the holiday weekend, according to Chris Krueger, managing director at TD Cowenโs Washington Research Group.
โIn terms of timing, a breakthrough today is possible but not probable,โ Krueger wrote in a note on Wednesday.
โIf the House holds to the 72-hour rule (legislation posted for 72 hours before a vote to give all a chance to read the legislation), the absolute drop-dead for a deal announcement to pass by June 1 is Sunday, May 28. And that would require the Senate to move with incredible speed, which is not something that institution is typically associated with.โ
Many analysts have been expecting a short-term move on the debt limit that would provide a divided Washington with more to come to an agreement. Krueger indicated he thinks thatโs still possible.
โAll sides continue to fade a short-term hike/suspension of the debt ceiling into October, though the longer this saga continues without resolution we see the chances increasing by the hour for that short-term hike,โ the Cowen analyst wrote.
Robert Schroeder contributed to this report.
[ad_2]
Source link
Leave a Reply