If lawmakers don’t raise the nation’s borrowing limit by June, the federal government runs the risk of defaulting on its debt obligations, Treasury Secretary Janet Yellen said in January. Markets aren’t shrugging that off.
You’d hardly know by looking at financial markets that the US debt limit was breached in January. But that’s starting to change, in what is shaping up to be a nail-biting game of debt ceiling squabbling as the shot clock is winding down. If lawmakers don’t raise the nation’s borrowing limit by June, the federal government runs the risk of defaulting on its debt obligations, Treasury Secretary Janet Yellen said in January.
Investors’ anxieties are also evident in spreads on US five-year credit default swaps, which have widened to 50 basis points, according to S&P Global Market Intelligence data. When the debt ceiling was breached in January, five-year CDS spreads hovered around 35 basis points. When a bondholder purchases a credit default swap they are guaranteed to receive the money they’re owed in the event that the bond issuer defaults.
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