US Treasury’s Cash Balance Hits Lowest Level Since 2017 as Debt Negotiations Intensify

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The financial situation of the US Treasury is reaching a critical point, as cash reserves dwindle and available accounting tactics to circumvent the debt ceiling diminish.

Negotiations in Washington are grappling with the challenge of reaching a consensus on the statutory debt limit that would satisfy both political factions.

Recent data released on Friday reveals that the Treasury’s cash balance dropped to its lowest level since 2017, standing at $38.8 billion as of Thursday. This represents a significant decline from $49.5 billion just a day earlier and a sharp decrease from $140 billion recorded on May 12. The Treasury’s financial resources have been under strain due to measures implemented to prevent breaching the formidable $31.4 trillion debt ceiling.

Concurrently, the extraordinary measures employed by Treasury Secretary Janet Yellen to avoid reaching the borrowing limit are also nearing exhaustion. The Department of the Treasury disclosed in a statement on Friday that only $67 billion of the authorized special measures remained as of May 24. This figure represents a substantial reduction from approximately $92 billion reported on May 17 and accounts for a fraction of the total $335 billion in authorized measures.

The convergence of declining cash balances and dwindling extraordinary measures adds to the urgency of finding a resolution to the ongoing debt limit negotiations. The financial viability of the US Treasury hangs in the balance as stakeholders grapple with the pressing need to avert a breach of the debt cap and its potential far-reaching consequences.

Treasury Secretary Janet Yellen has issued a sobering warning, indicating that the government’s coffers may face depletion as early as early June. However, amidst the uncertainties, recent developments in Washington hint at a glimmer of hope for a potential agreement between Republicans and Democrats, although a definitive accord remains elusive at this stage.

The financial landscape remains influenced by the risk of default, which has prompted investors to exercise caution. Notably, the premium demanded by investors to hold US bonds that bear the highest vulnerability to default, in the event of a failure to reach a consensus between Congress and the White House, continued its decline on Friday. Consequently, yields on these bonds slid below the critical threshold of 6%, underscoring the prevailing apprehensions in the financial markets.

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