On the other hand, we have a more significant date: 17 October. This is the day where the debt ceiling will be breached. That's a more serious thing to consider. When the debt ceiling isn't raised, there is the imminent problem of maturing debt. The short term maturities are going to be the ones that default first. Chart 1 gives the T-bills with their maturity date. Those that mature on 17 October have a spike in yield. You will see that those yields are skyrocketing every day closer to the debt ceiling default date of 17 October. So the market is anticipating an outright default. This will have severe implications on credit transactions all over the world as noted by Bill Gross.
|Chart 1: T-bills|
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