Yellen pushes back forecast of potential US default date

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Friday extended the deadline for raising the federal debt limit, saying the government would default on its obligations if Congress does not increase the country’s $31.4 trillion debt ceiling by June 5.

Yellen had previously said a default could happen potentially as early as June 1.

The extension buys White House and congressional negotiators more time to strike a deal to raise the statutory ceiling on the nation’s borrowing capacity.

In a letter to Congress, Yellen said her department will make more than $130 billion of scheduled payments in the first two days in June, including to veterans and Social Security and Medicare recipients.

“During the week of June 5, Treasury is scheduled to make an estimated $92 billion of payments and transfers,” including a roughly $36 billion quarterly adjustment toward Social Security and Medicare trust funds, Yellen wrote.

“Therefore, our projected resources would be inadequate to satisfy all of these obligations,” she said.

Yellen also said the department used an extraordinary cash management measure on Thursday, swapping approximately $2 billion of Treasury securities between the Civil Service Retirement and Disability Fund and the Federal Financing Bank to stave off the potential default date. The measure was last used in 2015, she said.

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