Debt Ceiling Deal Doubts Rise - USA Default Risk Hasn't Done This Since Lehman

Tyler Durden's picture

The US Treasury Bill market remains notably inverted around the uncertain timing of the US debt limit debacle.

As Bloomberg reports, while Treasury bills maturing in October continue underperforming against November and December securities, the market has a murky view on the drop-dead date for the U.S. debt ceiling.

At the start of last week, concerns shifted to early October after the Treasury said in its 3Q refunding statement that it expects to be able to fund the govt through the end of September.


Focus then shifted back toward mid-October after the head of the House Freedom Caucus said he is ready to accept a debt ceiling increase without other conditions


However, one more worrisome market is starting to notably wake up to the reality of a deeply divided congress unable to agree on anything. The market for sovereign credit risk is flashing red with USA 5Y CDS now trading at its most extreme levels to German 5Y CDS since Lehman.

Note that the current credit-risk-premium for US Treasuries is higher than it was during 2013's government shutdown and 2015's down-to-the-wire debt ceiling debate.


But while Treasury and credit markets are flashing red anxiety levels, the VIX curve is doing the exact opposite and pricing in a relative drop in volatility... before a resurgence in the start of 2018...


So T-Bills worry about early October... VIX worries about year-end... and CDS confirm they have a problem. Who will be right?

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bobert727's picture

NO....not since Lehman?

TahoeBilly2012's picture

Am I the only one thinking things are about to blow sky high? 

Raffie's picture

maybe 5+ years from now.

I would NOT be worried till the DOW hits 50k...

Raffie's picture

I'm sure it's nothing to be worried about.

Please continue pumping the stawk mockets like there is no tomorrow.

cristo's picture


The US government has shut down 18 times in last 30 years and it has raised debt ceiling 80 times since 1960.

what'sdifferent this time ? Nothing or .........

Nixon  shock 71

Trump shock 17

lester1's picture

PPT will save the day


Advoc8tr's picture

Opensource blockchain debt factoring ... intersting idea.  The Populous platform won't be ready in time unfortunately.

Silver Savior's picture

They will just raise it some more. Gotta buy those $20 nutz n' bolts for the military industrial complex. 

Storm-Clouds's picture

As long as you don't leak any GOT spoilers what could go wrong?

OrdleOccupando's picture

" . . . since Lehman!"


new game's picture

laughing as i walk out of the room to take a piss...

flush it, next..

congress is a joke.

this country is a fuking joke.

still waiting for a fist fight, maxine vs ???

think see would get a black eye?

chairman of the bored's picture

two things you cant give a DINDO,a fat lip or a black eye....

MadhyaBharatx's picture

They just keep raising the ceiling. Nothing ever going to change.

goldoverbtc's picture

There is nothing to worry about they are going to pay the debts and raise the debt ceiling.  The debt ceiling isn't real for one, the government can always borrow money from the fed.  Everyone in congress would be voted out if they didnt pay their bills.  The dollar is already at a low for the year even though it has rebounded a little from the jobs report.  This would destroy the dollar and cause chaos.  A chaos they couldn't put on trump and the Russians.


Ben A Drill's picture

And today is only Monday.

Sky flyer's picture

As much as I enjoy a good "since Lehman" article, the rules have changed tremendously since Lehman. The bots and ppt are in control now. This thing blows when tptb say it does.

jamesmmu's picture

Trust me, they will raise the debt ceiling, not only that, it will be the GOP cave first regardless of Trump. Same thing with the Russian Sanction, Trump doesnt want it, but he knew the house and senate will override the veto and increase the chance he will be impeached.



Catahoula's picture

Debt ceiling will be raised

Ace006's picture

But first . . . the Dance of the Sugar Plum Fairies.

sinbad2's picture

It seems that the US no longer feels the law of gravity, the physical world has no limitations as far as the US economy is concerned.

The US could print enough money to buy every bit of land and building of every country on earth, and the US dollar would still be the most valuable piece of paper in all creation.

Then one day?

Akdov Telmig's picture

Of course the debt ceiling will be raised, but the thing is that they are going to do it at the last minute, after a pathetic masquerade to use the debt ceiling as leverage to get some concessions.


And that could theoretically make the market nervous and send the USD crashing, that wouldn't be the first time, one thing that looks like certain is than the whole thing isn't going to be a smooth process. 

Rick Cerone's picture

Can we increase the debt ceiling AND keep the 10 year T Bond yield under 3%???

Watch the magic! POOF!

Dragon HAwk's picture

Seen this Movie before, It's Boring

Ink Pusher's picture

Paper ,paper everywhere and none of it will be worth a shit come year's end.  

I can't believe anyone would be playing anything except shorts in this highly toxic environment just for the sake of their own pitiful survival.

Anyone who is going long is essentially a big part of the pandemic debt denial problem and not even looking for the solution.

Mark Baum: I have a feeling in a few years people are going to be doing what they always do when the economy tanks. They will be blaming immigrants and poor people.

Mark Baum: We live in an era of fraud in America. Not just in banking, but in government, education, religion, food, even baseball... What bothers me ins't that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that? I thought we were better than this, I really did.

Mark Baum: The banks have given us 25% interest rates on credit cards. They have screwed us on student loans that we can never get out from under. Then this guy walks into my office and says those same banks got greedy, they lost track of the market, and I can profit off of their stupidity? Fuck, yeah, I want him to be right!

jmeyer's picture

No worries ZH'ers. Debt IS money now. And the Fed and CB's do actually have everything under control. Sure, some will suffer but in the long run it's really OK. The Fed has smoothed out business cycles. If you look at history frequent business cycles crushed many and helped some others. It takes a non-political powerful entity to control things since the politicians can't manage financial things. Black swans will definitely appear; nothing's perfect. The politicians will blame the Fed and CB's who will then get us out of the shithole that HUMANS created. HUMANS created, not something you want to blame. Remember that BANKERS WANT PEOPLE TO MAKE MONEY AND BE HAPPY while Politicians DON"T GIVE A SHIT and just want POWER.

RSDallas's picture

historically it has been the retail investor who blew the market up, think 29 - 1931, 87, and 2000, and 2008-2009 but now the retail investor is just a fraction of what he once was. So the Fed thinks that since these little trouble makers are out of this market, well we can keep this bull shit going!!! Not so fast, every market participant is greedy. Plain and simple. So, what the idiots at the Fed don't get is that greed is what moves every market higher and eventually the greedy decide to get out. The only thing I know is that someone will be first to get out. Who it is I don't know, but good luck to all!

wobblie's picture

Theater and finance masturbation. That's all this is.

Debt ceiling is a phony crisis. Read/watch Michael Hudson -- by far the best economist out there.

lntr's picture

Creepy_Azz_Crackaah make up your mind. 
I saw you promoting Shepwave earlier and now you are upset at someone eles.  Shepwave at least seems legit analyst. 

sarz's picture

I don't get it. Why does the government need to borrow money? Can't the Treasury just issue its own money rather than being obligated to Jewish bankers who have in effect been given the weird right to conjure the nation's money out of thin air and then lend it to the government?