Axios Markets

Time is money. But in the case of the debt ceiling, money is also time, Matt writes.

Driving the news: Uncle Sam's checking account — something known as the Treasury General Account, held at the Federal Reserve Bank of New York — is dwindling fast.

• The last weekly update on the account showed the balance falling to less than $61 billion, its lowest level since the recent round of wrangling over raising the debt ceiling began.

Why it matters: The so-called X-date is when this account — which fluctuates depending on tax collections and government payments — no longer has enough money to meet the country's financial obligations, potentially triggering a technical default.

The latest: President Biden and House Speaker Kevin McCarthy held what they described as productive talks at the White House late yesterday, but no deal was reached.

Context: A month ago, many on Wall Street closely tracking the debt ceiling issue thought the true X-date would likely be sometime in July or even early August.

• Yes, but: April yielded disappointing tax revenues — likely due to the ugly year on Wall Street in 2022, which cut capital gains receipts — leaving the Treasury less wiggle room than expected.

What they're saying: Many analysts now think the moment of truth may actually come sometime in early June, which the Treasury has publicly said for months.

• "By June 8-9 cash is likely to drop under $30 billion," Goldman Sachs analysts wrote, adding, "At that point, we believe there are even odds that the Treasury exhausts its funds entirely."
• JPMorgan analysts wrote that "up until May 4th, [our] view was that the x-date would actually be mid/early August but, after weak tax receipt data from April likely driven by lower capital gains taxes collected, the date was revised to June 9 and later June 7."

The bottom line: Time keeps on slipping, slipping, slipping...

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The amount of U.S. corporate debt trading at distressed levels is at a level rarely seen over the last decade, Axios' Kate Marino writes.

Why it matters: We’re all on the lookout for signs of a deeper “credit crunch” as a result of the Fed’s historic rate-hiking campaign.

• So far, what we're seeing is a growing bifurcation in the credit markets: For reasonably healthy companies, credit is widely available (though more costly than a year ago) — but for already struggling companies, credit is fast drying up.

What they’re saying: “Market access is wide open to higher-quality [companies] … And yet capital is getting severely constrained in areas where issuers overindulged on credit in recent years,” BofA Global Research credit strategist Oleg Melentyev wrote in a report on Friday.

• Moody’s Investors Service adds that high rates, slowing growth and sticky inflation “will uncover pockets of financial vulnerability” — making it harder for low-rated companies to refinance and leading to rising defaults.

Zoom out: If this all sounds familiar, it might be because we wrote last week about both of these diverging trends.

• That week started with an unusual flurry of large bankruptcies; it also wound up being one of the busiest weeks of the year for deals in the investment-grade bond market, where higher-quality companies borrow money.

The bottom line: Though markets are functioning pretty well now — especially considering the recent string of bank failures — “pressures remain under the surface,” Melentyev wrote.

Recession chatter from C-suite leaders has chilled since last year, Kate writes.

What’s happening: Mentions of the word “recession” on earnings calls declined for the third consecutive quarter (all but about 25 companies in the S&P 500 have reported results thus far for Q1).

• As of now, total mentions in Q1 are less than half of what they were in Q2 2022.

The big picture: A year ago, recession fears were high as the Fed kicked off a series of steep rate hikes. Inflation was still high, too, and Russia’s war on Ukraine threatened to tip the global economy into recession.

• But so far, earnings have remained fairly strong — and corporate leaders don’t seem to think we’re on the cusp of a deep downturn, as Matt wrote yesterday

The share of Americans who skipped medical treatment last year because of costs rose substantially from the lows of 2020 and 2021, per a Federal Reserve Survey out Monday, Emily writes.

• The most commonly skipped form of medical treatment was the dentist, followed by seeing a doctor and paying for a prescription.

Why it matters: The ability to afford health care often translates into better health.

• The survey also found that in families with income less than $25,000, 75% reported being in good health, compared with 91% for those with income of $100,000 or more.

Zoom out: Inflation walloped Americans across income levels in 2022, causing many to cut back on spending — and that includes health care, an area people feel they can cut when times are tight.

• 35% of Americans said their financial situation was worse in 2022 than the year prior, per the survey. That's the largest share on record since the Fed started asking the question a decade ago, Axios' Courtenay Brown reported.

Context: Back in 2020 and 2021, a record low share of Americans skipped medical treatment due to cost, likely because they had more cash in their pockets thanks to the COVID-era stimulus, as well as more access to health care — Medicaid coverage was also expanded in the pandemic.

What to watch: If the line on that chart rises more next year. Millions of Americans are expected to lose Medicaid access this year.

• Those without insurance are twice as likely to skip treatment, the Fed survey found.