The Congressional Budget Office is out with treasury information as the debt limit negotiations continue.
- US faces a significant risk of payment default in the 1st 2 weeks of June without a debt limit increase
- ability to fund government operations will remain uncertain throughout May due to the variability of revenue collections and outlays
- Treasury would be unable to make some payments before its cash balance and extraordinary borrowing measures are fully depleted
- Treasure can probably finance the government through at least the end of July if available cash and extraordinary measures last through June 15 without the fault
- End of July scenario depends on treasury collecting sufficient June 15 quarterly estimated tax payments, and accessing $145 billion in new extraordinary measures available on June 30
- As of April 30, the treasury had $316 billion cash and $41 billion of available borrowing capacity under extraordinary measures
- Treasury reported cash balances of 154.8 billion on Wednesday
- Mid-May outlays likely to be above 50 billion due to interest payments on a 10-year notes and on bonds
- Likely will pay out about 25 billion in military pay, Social Security, and other benefits
- May financing needs at $200 billion to $300 billion, June at $75 billion to $100 billion
- US government will likely need resources of 1.9 trillion to 2.2 trillion to finance operations through September 30 fiscal year-end
- 10-year deficit forecast increased by 51 billion to $20.26 trillion
- US government payments could result in credit market distress, rapid increases in borrowing costs and economic disruptions
The numbers are not encouraging.
Meanwhile staffers are meeting to work closer to an agreement but the major parties are not expected to meet until Monday/Tuesday of next week.
Markets are getting spooked first by the Michigan inflation and now by the CBO saber rattling.
- NASDAQ index now down -0.43%
- 2 year yield now up 6.5 basis points
- USD continues to move higher. The DXY index is now up 0.48% at 102.55 as a flight to the relative safety of the USD seems to be the reaction.
Looking at the DXY, the price has moved above the swing high from May 2 at 102.40 and is breaking outside of an up-and-down trading range mostly between 101 and 102.40.
Looking at the hourly chart, the 38.2% retracement of the move down from the March 8 high comes in at 102.742. The swing high from April 10 comes in at 102.807 near that retracement level. That area is the next target
