Investors Probably Aren’t Very Worried That America Will Default on its Bonds


Have you noticed that I’m desperately trying today not to write about the idiotic budget theater currently playing an unlimited engagement at the Capitol Hill Vaudeville Palace? You haven’t? Well, I am. It’s just too childish and depressing and monotonous to bear.

I’m sure I’ll buckle under the strain eventually and write about it again. But not today. I. Will. Be. Strong. In the meantime, Jim Tankersley draws our attention to the chart on the right. I used to hate blog posts called “_____ in One Chart,” but ever since ” _____ in 13 Charts” became the new normal, I actively look forward to posts with only a single chart in them. This one shows the trajectory of the US sovereign CDS spread, which is theoretically a measure of how likely it is that treasury bonds will default. On Monday, it shot up from about 22 basis points to 32 bps.

So what does it mean? Probably nothing. For a variety of reasons, the US sovereign CDS market is very thin, which means this spike could have been the result of just two or three trades. And historically, even 32 bps is pretty low. We’ve seen spikes well above 50 bps several times in the past few years.

Beyond that, of course, it just doesn’t make sense. Even if we have a debt limit crisis, there’s zero chance that holders of treasurys will miss any payments. So what this spike really tells us is probably two things. First, a few people have decided to take out a bet that some other people will panic, allowing them to make some money selling their positions for a quick profit. Second, the CDS markets often don’t tell us much of anything useful. After all, nothing happened on Monday that we didn’t already know on Friday.

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We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

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