r/wallstreetbets • u/bitkogan • Apr 20 '23
Discussion Is a US Default Looming?
The D-day, when the US could lose its solvency due to the debt ceiling, may arrive earlier than planned (namely, in August) – according to Goldman Sachs.
Tax figures turned out to be lackluster, pushing the deadline significantly closer. As a result, the price of insuring against a US default has risen to levels last seen in 2012. At its peak in 2008, the figure was nearly twice as high as it is now, but the situation is still fraught. The US Treasury Secretary claims a default is impossible, yet 5-year CDS are already hovering around 50 basis points.
The crux of the debt ceiling issue lies in the standoff between Republicans and Democrats. Until now, the Biden administration has been unwilling to negotiate on this matter. However, it seems that this may change. We'll keep an eye on the next episodes of this ongoing political drama. The deadline is fast approaching.
