Yellen Warns of Default Risk by October Without Debt-Limit Hike

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Yellen Warns of Default Risk by October Without Debt-Limit Hike
Credit: © Reuters.

(Bloomberg) -- Secretary Janet Yellen said the Treasury Department will begin special steps on July 30 to avoid breaching the U.S. debt limit as a two-year suspension of the ceiling ends, urging lawmakers to act “as soon as possible” to avert a payment default.

There are scenarios in which the Treasury could exhaust its special measures and run out of cash “soon after Congress returns from recess” in September, Yellen said Friday in a letter to lawmakers. She said cash and such measures are expected to decrease by $150 billion on Oct. 1 alone “due to large mandatory payments.”

Yellen’s warning follows a Congressional Budget Office report on Wednesday saying U.S. lawmakers likely have until October or November to raise or suspend the debt limit. She said the Treasury is unable to provide its own specific estimate of how long so-called extraordinary measures would last amid “heightened uncertanty” over payments and receipts during the coronavirus pandemic.

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