© Bloomberg. US House Speaker Kevin McCarthy, a Republican from California, speaks to members of the media at the US Capitol in Washington, DC, US, on Wednesday, May 24, 2023. Debt limit talks in Washington have hit a fresh impasse with negotiators far apart on key issues, especially the spending cuts demanded by Republicans, as time runs short to avert a historic US default.
(Bloomberg) — Speaker Kevin McCarthy said issues remain in negotiations with the Biden administration on raising the federal debt limit as the clock ticks down to the point when the Treasury runs out of cash.
“I thought we made some progress” in talks Wednesday, McCarthy told reporters Thursday morning. “There are still outstanding issues. I’ve directed our team to work 24/7 to solve this problem.”
The California Republican added, “I don’t think everybody is going to be happy at the end of the day. That’s not how this system works.” He declined to specify when or where the next round of negotiations will be.
Financial markets are showing increasing signs of stress as talks wear on. Treasury Secretary Janet Yellen has said her department could run out of cash as soon as June 1, and the following day sees a payment due to millions of Social Security beneficiaries, putting pressure on politicians to resolve the impasse.
A key money-market rate jumped, as lenders of cash appeared more skittish about making overnight loans backed by Treasury securities. Positive earnings news left US stock futures higher.
Further unease was seen in a Fitch Ratings move on Wednesday to place the AAA credit rating for the US on watch for a potential downgrade. The US lost its AAA grade at S&P Global (NYSE:SPGI) Ratings during a similar partisan standoff on the debt ceiling in 2011.
The White House and Treasury said that Fitch move demonstrated the urgency of reaching a speedy resolution to the debt ceiling standoff. But McCarthy said that he wasn’t worried about the Fitch move, and that Thursday that no word from the ratings agency was needed to remind negotiators of the importance of moving on the matter.
(Updates with additional comments and markets starting in fourth paragraph.)
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