15 Oct 2013
Flash: Implied US default window - Rabobank
FXstreet.com (London) - Research teams at Rabobank commented on the debt ceiling deadline.
Key Quotes:
“Tracing the rising yields on US sovereign debt issues around and after the date that the debt ceiling would be hit, we deduce an implied time frame for a US default, which –if the debt limit is reached– according to the risk premiums in US yields is estimated by market participants to last for about a month”.
“Moreover, we argue that although postponing the deadline by a few weeks or months will lower yields on the bonds that currently fall within this implied default window, the debt maturing around the new deadline should suffer from increased yields”.
Key Quotes:
“Tracing the rising yields on US sovereign debt issues around and after the date that the debt ceiling would be hit, we deduce an implied time frame for a US default, which –if the debt limit is reached– according to the risk premiums in US yields is estimated by market participants to last for about a month”.
“Moreover, we argue that although postponing the deadline by a few weeks or months will lower yields on the bonds that currently fall within this implied default window, the debt maturing around the new deadline should suffer from increased yields”.