Goldman Sachs Group Inc. economists estimated that the Treasury Department will by June 8 or 9 see its cash levels drop below the $30 billion it’s signaled as a bare minimum for meeting federal obligations falling due.
“The estimate is subject to substantial uncertainty so there is certainly a chance that receipts could slow more than expected and leave the Treasury short of cash by June 1 or 2,” Goldman economists Alec Phillips and Tim Krupa wrote in a May 19 note to clients.
The Treasury has been steadily running down its cash balance to meet federal payments, being unable to increase its net borrowing from the public — constrained by the $31.4 trillion debt limit. Treasury Secretary Janet Yellen on Sunday reiterated her warning that it’s possible the Treasury exhausts its special measures to keep within the limit as soon as June 1, speaking on NBC.
As of Thursday, the Treasury’s cash balance stood at just over $57 billion. As of the day before, it also had about $92 billion of special measures available.
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“We are confident that Congress will avoid going past the deadline without action, but there are many paths this could take,” the Goldman duo wrote. They assigned, as of Friday, 30% odds of a deal between the two sides in Washington this week, along with 30% chances of an agreement “shortly before” the deadline.
Since the note was published, President Joe Biden and Speaker Kevin McCarthy scheduled a meeting on Monday, with their staff expected to resume negotiations Sunday evening.
While financial markets have only shown limited signs of broader concern about the approaching moment when the Treasury runs out of sufficient cash, an increase in volatility may still be in store, Phillips and Krupa wrote.
“While we expect a deal to occur ahead of the deadline, we also expect a few more twists along the way, and suspect that markets are likely to price in additional risk before the debt limit is finally raised,” they wrote.
