The bond market is beginning to stress about a default.
Yields on the US T-bills expiring at the end of the month shot higher today after an auction for 4-week bills sold with a yield of 0.350% — the highest yield since Oct 2008. That’s the first real sign the market fears the US could actually default. Just three weeks ago, a four-week auction sold with a yield of 0%.
Oct 31 US bills
At the top of the hour, the US sells 3-year notes. So far, there is no sign of default worry into anything with a longer maturity.
There is lots of chatter about what a default would mean and look like but the real (and growing) risk is a downgrade. If the US government hadn’t sued S&P, I’m sure Fitch and Moody’s would have already downgraded the US.
