The clock is ticking on the U.S. debt limit, which was already technically reached on 19 January 2023. The U.S. Treasury currently estimates that emergency measures which are expected to extend the most severe impacts of the debt limit by several months, will be exhausted in June 2023. The economic risks are potentially high.
Of course, many expect politicians to reach an agreement to raise the debt limit prior to June, but what if they don’t? Financial markets are showing some concern, credit default swaps on U.S. government debt, have reached multi-year highs, though haven’t yet approached the levels we saw in 2011, when the U.S. potentially came within a few days of default and S&P downgraded the U.S. government’s credit rating.
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