With no resolution on the U.S. debt limit, the cost of insuring Treasuries against default continues to edge up steadily. The U.S. hit its debt ceiling in January, and the Treasury is currently using extraordinary measures to pay the bills, essentially borrowing from long-term government funds to make operational payments. That’s not sustainable and funds would be exhausted by the summer or early fall on current estimates from the Bipartisan Policy Center.
Market Assessment
The market’s view on the risks from the debt ceiling can be measured via credit default swaps. These are essentially a measure of the risks associated with U.S. government debt.
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