Concerns are mounting over the potential of a historic default by the US government, with a non-partisan congressional report warning of a "significant risk" within the first two weeks of June.
The research supports Treasury Secretary Janet Yellen's June 1 default notice. The US might fail for the first time if it cannot increase its $31.4 trillion debt ceiling, according to Reuters.
The Congressional Budget Office has warned that there is a "significant risk" that the government will not be able to pay all of its obligations within the first two weeks of June.
Even if the Treasury ultimately runs out of funds in early June, the federal government's debt payments will remain uncertain throughout May, according to Congress' budget scorekeeper.
Since January, President Joe Biden and the Democrats have called for a swift increase in the national borrowing ceiling without restrictions. Republicans, who barely control the House of Representatives, want new spending restrictions before covering borrowing on already passed expenditures.
Read Also : Heatwave Hits Western US, Canada
Worries Grow Over US Debt Ceiling Issue
The potential of a US debt default crisis is beginning to worry Americans, with a new survey from the University of Michigan revealing that for the first time this year, the "debt crisis standoff" is contributing to a decline in consumer sentiment, Yahoo! Finance reported.
The US consumer sentiment index preliminary print was at its lowest in six months in May as a result of growing concerns about the US economy.
World Bank President David Malpass says the US debt limit issue is also causing global economic concerns.
At a meeting of Group of Seven (G7) finance officials in Japan, David Malpass warned that "distress in the world's biggest economy" would negatively impact everyone.
Meanwhile, Investors and traders are beginning to bail on short-term government bills, with volatile trading being observed in the two-month maturity on Friday.
According to data from Tradeweb in the New York afternoon, the rate for the corresponding 2-month Treasury bill rose by 32.6 basis points to 4.865%, which partially reverses the 43.4-basis-point decline observed in the previous session, per Market Watch.
The severity of Friday's move indicates increasing worry that the US government may run low on money in June. Yields rise anytime the underlying maturity sells out.
Next week, President Joe Biden is expected to attend a G7 summit in Niigata, Japan, but he has warned that if he and congressional leaders do not make sufficient progress toward raising the US debt limit, he may postpone his trip.
