Jefferies Says U.S. Risks Technical Default in 2021 on Debt Feud
Jefferies Says U.S. Risks Technical Default in 2021 on Debt Feud
(Bloomberg) -- The short-term extension of the U.S. government’s borrowing authority may not last beyond the end of December, with the risk of the Treasury missing a payment this year, according to Jefferies.
“We don’t have enough information to pinpoint a specific x-date right now, but we suspect it would fall some time between Dec. 24 and Dec. 31,” economists Thomas Simons and Aneta Markowska wrote in a note to clients. “The chances that Treasury could make it past year-end are very slim, given our projections.”
The U.S. Treasury has already mapped out how to use up most of the $480 billion increase that Congress has passed, with one of the biggest bites coming from the so-called extraordinary measures that Treasury Secretary Janet Yellen has been using to keep things ticking over. Replenishing the coffers that these have drawn on will use up more than half of the planned limit increase.
Yet once the borrowing authority is gone, Treasury will again turn to the extraordinary measures. Only this time there will be less available because officials won’t have access to the one-time payout they had on Sept. 30, according to Jefferies. The economists project the borrowing authority will end around mid-December, with extraordinary measures running closer about $300 billion.
“There is lots of uncertainty in the forecast, but we expect that the x-date will fall some time between Christmas and New Year’s Day,” the economists said.
Secretary Yellen said in a letter to Congress Monday the department will be able to finance the operations of the Federal Government through Dec. 3 and it’s imperative Congress acts to suspend or raise the debt limit that provides longer-term certainty.
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