US default looms as debt agreement fails

People pass the front of the New York Stock Exchange in New York, on March 22, 2023. (Photo: AP)

U.S. President Joe Biden and House Speaker Kevin McCarthy failed to reach an agreement on the debt ceiling on Monday, U.S. media reported. Biden said their talks were "productive", while McCarthy told reporters that negotiators are trying to find common grounds.

The Republican Party underscored the urgency of reaching an agreement, asserting that a debt ceiling agreement must be finalized this week to secure Congressional approval before June 1.

Treasury Secretary Janet Yellen reinforced her warning to McCarthy on Monday that "it is highly likely that Treasury will no longer be able to satisfy all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1."

Yellen worried that past debt limit impasses only caused "serious harm to business and consumer confidence". Meanwhile, short-term borrowing costs for taxpayers were raised and the credit rating of the U.S. was negatively impacted, she wrote.

As the debt agreement fails, U.S. stocks closed down on Tuesday. The S&P 500 and the Nasdaq closed 1 percent lower, and Dow dropped over 230 points.