(Bloomberg) -- The amount of money the US government has to pay its bills dwindled to the lowest since December 2021, deepening concern that it will run out of funds by early next month if the debt limit isn’t raised or suspended before then.
The Treasury’s cash balance dropped to $68.3 billion as of May 17, according to data published Thursday. That’s down from from $94.6 billion a day earlier and $140 billion at the end of last week. The Treasury’s bank account has been under downward pressure recently because of measures being taken to avoid breaching the $31.4 trillion debt cap.
“We’re very quickly getting to the point where an increase in the debt ceiling is needed immediately and without delay,” said TD Securities strategist Gennadiy Goldberg. “Markets could get quite nervous.”
Treasury Secretary Janet Yellen reiterated to lawmakers earlier this week that her department’s ability to avoid breaching the statutory debt ceiling via special accounting maneuvers could be exhausted around early June. The window for a resolution of the standoff is clearly narrowing, with the Treasury saying last week that it had run through all but about $88 billion of its authorized extraordinary measures as of last Wednesday.
Angst over a standoff eased Thursday as House Speaker Kevin McCarthy said that negotiators on the federal debt limit may reach an agreement in principle as soon as this weekend and that he expects his chamber to consider a deal by next week. However, the hardline conservative House Freedom Caucus called for an end to bipartisan talks to raise or suspend the federal debt limit, insisting instead that the Senate vote on the House Republican bill passed in April.
Yields on the shortest-dated T-bills have dropped from elevated levels on optimism over a debt deal. Still, those rates remain notably higher compared to securities maturing through the end of June, as pricing has suggested for some time a level of increased concern stretching from June through much of the US summer.
“Congress is saying all the right things, but we’re still driving toward the cliff,” Goldberg said.
©2023 Bloomberg L.P.