(Bloomberg) -- President Joe Biden and Republican House Speaker Kevin McCarthy are set to meet Monday for talks on averting a catastrophic US default as time runs short and key differences remain.

Negotiations have whipsawed between progress and deadlock for days as the two sides simultaneously grapple for political advantage and a deal.

The leaders’ hand-picked negotiators met for more than two hours Sunday evening in McCarthy’s office at the US Capitol but did not discuss the status of those discussions with reporters.

Traders are girding for turbulence in markets with repayment of US Treasury debt, long regarded as the global benchmark for financial safety, in question as soon as June 1. US stocks slumped Friday after Republicans temporarily walked out on talks.

Asian shares crept higher while US and European stock futures inched lower. Investors are weighing a likely pause in interest rate hikes by the Federal Reserve against the risk of US default. Contracts for the S&P 500 and the Nasdaq 100 were fractionally lower, adding to small declines on Friday.

After negotiations stalled this weekend, Biden called McCarthy from Air Force One on his way back from an international summit in Japan. McCarthy told reporters the call was “productive,” shifting to an upbeat outlook after earlier pessimism.

Biden returned to Washington late Sunday. “It went well,” he said of his talk with the speaker. “We’ll talk tomorrow.”

Treasury Secretary Janet Yellen said earlier Sunday that the chances the US can pay all its bills by mid-June are “quite low.” Yellen underscored the urgency of the situation, telling NBC there are tax payments expected then that are substantial and “getting to that date is the problem.”

She previously said the US could run out of funds to make good on all its payments as soon as June 1. Goldman Sachs Group Inc. economists estimated in a note to clients the US Treasury cash balance would drop below what it needs to pay debts by June 8 or 9 but projected a “chance” of default by June 1.

Economic Impact

The current standoff over the debt ceiling has the potential to put more strain on the US economy, which is already vulnerable to a recession after a series of interest-rate hikes by the Federal Reserve, according to Bloomberg Economics.

Spending cuts and caps are key points of disagreement in the negotiations. Biden told reporters before departing Japan that he proposed to cut spending and that the onus is now on Republicans to shift their demands. The president insisted he wouldn’t agree to a deal that protects tax breaks for the wealthy and the fossil-fuel and pharmaceutical industries while cutting health-care and education funding.

“Now it’s time for the other side to move from their extreme positions because much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said.

Republicans have lowered their demands on spending caps from 10 years to six years, according to two people familiar with the talks, but the White House still wants the deal to last two years. 

One of the people said the GOP is still seeking a large increase to defense spending next year, something that would deepen cuts to social services. Democrats have demanded that defense, which is about half of all federal discretionary spending, not be fenced off from cuts.

Asked about the possibility of a short-term extension to avoid a debt default, McCarthy dismissed the idea.

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