US debt ceiling: Treasury could run out of money by June 5, says Janet Yellen

Treasury Secretary Janet Yellen on Friday told Congress that the US may default on its debt obligations by June 5, four days later than the earlier projection, if lawmakers do not come to a resolution for the federal debt ceiling.

According to CNBC US report, in a letter to House Speaker Kevin McCarthy, Yellen highlighted: “Based on the most recent data available, we now estimate that the Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5.”

“The extremely low level of remaining resources demands that I exhaust all available extraordinary measures to avoid being unable to meet all of the government’s commitments,” Yellen said in her letter.

The Joe Biden-led US administration would no longer have enough financial room to cover all of its expenses if the "X-date" predicted by the Treasury came to pass and the US debt ceiling was not raised, having used all of the extraordinary tactics it has used since January to stretch available funds.

The Treasury Secretary informed Congress that a swap of roughly $2 billion in Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank. This is one measure they had to use now for the first time since 2015 to get the US financial position to this point: 

“We have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” she added.

On Monday, Yellen said that her department might run out of cash as early as June 1 and would be “highly likely” to exhaust all its resources in “early June.”

Since the Treasury effectively exceeded the debt ceiling in January, it has been utilising emergency accounting procedures to avoid a default that would be disastrous for the financial system and the overall economy.