Janet Yellen, the U.S. Treasury Secretary, on Friday cautioned that the government will reach its borrowing limit on Tuesday, necessitating the use of “extraordinary measures” to prevent a potential default.

What Happened: Yellen revealed that the Treasury will commence the use of extraordinary measures starting January 21. The duration of these measures is uncertain, and Yellen has urged Congress to raise or suspend the debt limit to safeguard the nation’s credit, Reuters reported.

“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future.”

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Yellen announced the suspension of investments in two government employee benefit funds until March 14, aiming to restore borrowing capacity under the $36.1 trillion debt ceiling. As of last Thursday, the Treasury's borrowings had reached $36.08 trillion.

This suspension will affect new investments that are not immediately required to pay benefits from the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once the debt ceiling is either raised or suspended, these funds will need to be replenished.

Yellen has urged Congress to raise or suspend the debt limit to maintain the full faith and credit of the U.S. This issue with the debt ceiling presents an early challenge for Yellen’s anticipated successor, Scott Bessent, who is nominated by Trump for the Treasury position.

The Treasury has a range of extraordinary balance sheet measures available to prevent default, which could last for several months depending on tax revenues. However, failing to raise, suspend, or eliminate the debt limit could prevent the Treasury from meeting all its obligations, leading to potentially severe economic consequences.

Why It Matters: This announcement comes at a time when Yellen’s tenure has been marked by significant challenges. Earlier this month, it was reported that Yellen’s computer was hacked by Chinese state-sponsored hackers, who accessed “Law Enforcement Sensitive” data by targeting the U.S. Treasury Department.

Yellen’s short-term debt strategy has also been a topic of concern, with experts warning that it could lead to significant market turbulence as President-elect Donald Trump prepares to take office. This strategy, which involves rolling over short-term debt instead of issuing longer-dated bonds, has been criticized for potentially setting up a crisis for the incoming administration.

Meanwhile, in December, the iShares 20+ Year Treasury Bond ETF experienced record outflows of $5.5 billion, as 30-year Treasury yields climbed 40 basis points to 4.855%, marking their highest level in more than a year.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.