Tuesday, 6th June 2023
<To guardian.ng
Search
US  

US debt fight raising government borrowing costs: Yellen

The US government is facing increased borrowing costs due to the political crisis surrounding the nation's borrowing limit, Treasury Secretary Janet Yellen said Tuesday.

People walk and ride bicycles past the US Capitol in Washington, DC, on May 11, 2023. – A high-stakes meeting between President Joe Biden and key lawmakers from both parties on May 9, 2023, yielded no breakthrough on the impasse over the US debt limit, but the group agreed to keep trying to avert a devastating default. (Photo by Jim WATSON / AFP)

The US government is facing increased borrowing costs due to the political crisis surrounding the nation’s borrowing limit, Treasury Secretary Janet Yellen said Tuesday.

“We are already seeing the impacts of brinksmanship: Investors have become more reluctant to hold government debt that matures in early June,” Yellen said in prepared remarks ahead of a speech before the Independent Community Bankers of America, a trade group.

“The impasse has already increased the debt burden to American taxpayers,” she warned.

The rate on one-month US Treasury bonds rose to 5.74 percent on Monday, the highest in at least 20 years, and significantly higher than the Federal Reserve’s benchmark rate of between 5.0 and 5.25 percent.

In mid-April, one-month Treasury bonds rates were 3.29 percent.

The rate’s rise comes with a corresponding drop in the price of the bonds, meaning the US government must borrow more than under ordinary conditions.

Yellen on Monday reaffirmed her agency’s view that the United States could default on its debts as early as June 1 if Congress and the White House don’t reach an agreement on raising the federal borrowing limit.

Republicans, who control the House of Representatives, are currently in a standoff with Democratic President Joe Biden, demanding public spending cuts as a condition for lifting the so-called debt ceiling.

Negotiations are scheduled Tuesday between Biden, House Speaker Kevin McCarthy and the three other top political leaders in Congress, in hopes of reaching a deal.

“Too many businesses” are being forced to spend time “planning around the potential risk of US default, instead of thinking about longer-term investments,” Yellen said in her prepared remarks.

She again called on Congress to “address the debt limit as soon as possible.”