US Debt Ceiling Deadline Could Come Sooner Than Anticipated, Warn Bank Analysts

Analysts at banks have reportedly said the U.S. government’s deadline to raise the $31.4 trillion debt ceiling could come sooner than expected, increasing the possibility of a short-term debt limit extension.

What Happened: Goldman Sachs analysts stated weak tax collections so far in April point toward a higher probability that the so-called “X-date” — when the government is no longer able to pay all its bills — would be reached in the first half of June, reported Reuters.

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“As the debt limit deadline comes into better focus with additional tax receipt data, we expect to see somewhat greater pricing of debt limit risks in financial markets,” Goldman Sachs analysts said in a note.

Meanwhile, analysts at Citi stated they anticipated a short-term deal in June or July, according to the report.

The Treasury Department has cautioned the federal government could reach the moment when it won't be able to meet its financial obligations as early as June 5. The non-partisan Congressional Budget Office has estimated the moment would come sometime between July and September.

House Speaker Kevin McCarthy, on Monday, had outlined the spending cuts that Republicans would demand in exchange for voting to raise the debt limit. “Make no mistake: the longer President Biden waits to be sensible, to find an agreement, the more likely it becomes that this administration will bumble into the first default in our nation’s history,” he said, according to a CBS report.

Expert Take: John Madziyire, head of U.S. Treasuries and TIPS at Vanguard, said managers should expect volatility in specific short U.S. Treasury securities, according to the report. Investors would seek to avoid holding securities in the new time frame, he added.

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