Treasury Secretary Janet Yellen fired off a warning shot to Congress today, flagging a critical debt ceiling timeline that could rattle markets in early 2025.

Debt ceiling reinstates Jan 2
Default risk window: Jan 14-23
Treasury to deploy ‘extraordinary measures’ if needed

The timing adds another layer of complexity to an already heated political environment following the presidential inauguration. Markets have largely shrugged off previous debt ceiling standoffs, but the compressed timeline could spark volatility.

“Extraordinary measures” – Treasury’s emergency toolkit – will kick in if Congress fails to act, but these are temporary fixes, for perhaps 4-6 weeks. The real test will be whether the new Congress can navigate the political minefield around raising the ceiling, especially as Trump wants it eliminated.

It will be worth watching how the new administration’s relationship with Congress impacts the speed of negotiations — we will see who are the real fiscal hawks.

The market also assumes that Trump isn’t serious about bringing down the deficit, something this round of negotiations could reject or reinforce.