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Congress approves debt ceiling bill
02-06-2023 17:51
Congress approves debt ceiling bill
Congress approves debt ceiling bill

Fears about a default in the US have finally abated. After a prolonged standoff, the Senate passed bipartisan legislation that lifts the government's $31.4 trillion debt ceiling. However, the parties reached an agreement just a few days ahead of the X-date.

It was extremely hard for congressmen to make concessions. Hence, the bitter battle over the debt ceiling seemed endless and the final decision was made at the last moment. Uncertainty and risk aversion persisted in markets. US Treasury Secretary Janet Yellen was one of the first to warn about the problem. She noted that the US was unlikely to reach mid-June and still be able to pay its bills, underscoring the urgency to reach a deal. Thus, June 15 was a "hard deadline" for the federal government to raise the debt ceiling. After June 15, the country would have made additional tax payments. Yellen doubted that the United States would have had enough money until that date.

"We take the debt ceiling seriously as a constraint on our ability to pay bills that are coming due. And my assumption is that if the debt ceiling isn’t raised, there will be hard choices to make about what bills go unpaid," Yellen stressed.

White House Press Secretary Karen Jean-Pierre also added fuel to the fire. She accused Speaker of the House of Representatives Kevin McCarthy and his team of creating a threat of default. "The Speaker’s team put on the table an offer that was a big step back and contained a set of extreme partisan demands that could never pass both Houses of Congress,”  Karine Jean-Pierre pinpointed.

However, the parties eventually managed to strike a deal, averting a first-ever default.

 

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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