The US government is facing rising borrowing costs due to the political turmoil around the nation’s borrowing ceiling, Treasury Secretary Janet Yellen warned 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 by the Independent Community Bankers of America, a trade organization.
“The impasse has already increased the debt burden to American taxpayers,” she said.
The rate on one-month US Treasury bonds jumped to 5.74 percent on Monday, the highest in at least 20 years, and much higher than the Federal Reserve’s target rate of between 5.0 to 5.25 percent.
In mid-April, one-month Treasury bonds rates were 3.29 percent.
The rate’s rise comes with a commensurate decline in the price of the bonds, meaning the US government must borrow more than under usual conditions.
Yellen on Monday repeated her agency’s position that the United States might default on its obligations as early as June 1 if Congress and the White House don’t reach a deal on extending the federal borrowing limit.
Republicans, who control the House of Representatives, are now in a deadlock with Democratic President Joe Biden, demanding public expenditure cuts as a condition for increasing the so-called debt ceiling.
Negotiations are set Tuesday between Biden, House Speaker Kevin McCarthy and the three other top political leaders in Congress, in hopes of reaching a compromise.
“Too many businesses” are being compelled 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.”