Credit bodies are required again amid our financial concerns

Investors feel nervous that the United States government may struggle to pay its debts – and they are planning insurance in case of failure to pay.

The cost of securing exposure to US government debt was steady and hovered near its highest levels in two years, according to LSEG data.

It spreads or installments LSEG data showed that the US -year credit scores increased in 52 basis points starting from Wednesday from 16 basis points at the beginning of this year.

Credit credit. Buyers pay fees to protect themselves if the borrower – in this case from the United States government – is unable to pay their debts. When the cost of securing US debt increases, this is a sign that investors feel nervous.

The spread of CDS with a period of 5 years was about 50 basis points compared to about 30 basis points at the beginning of the year. In the CDS contract, the buyer pays a repeated allowance known as the difference to the seller. If the borrower, in this case, fails to pay the United States government around his debts, the seller must compensate the buyer.

Rong Ren Goh, director of the portfolio of the fixed income team at EastSpring Investments, said the CDS prices reflect the danger of the borrower and used to protect against financial troubles, not just the failure to completely pay.

Goh said that the recent increase in the demand for CDS contracts is “hedging against political risks, not insolvency”, which confirms the broader concern about our fiscal policy and “political defect”, instead of the market’s point of view that the government revolves around failure to meet its commitment.

Many industry monitors said that investors are in increasing concerns about the uninterrupted debt ceiling.

“The US Treasury Department has reached the point of legal debt in January 2025:” credit credit bodies have become common again as the roof of the debt remains unlawful. “

The Congress Budget Office said in a notice in March that the Treasury has already reached the extent of the current debt of $ 36.1 trillion and had no room for borrowing, “other than replacing ripe debts.”

Treasury Secretary Scott Bessin He said earlier this month His ministry was at the forefront of federal tax receipts that were collected on April 15, the deadline for reaching more accurate forecasts of the so-called “X-Date”, in reference to the date of the United States government exhausting its ability to borrow.

Data from Morningstar shows that the CDS nails are spreading to US government debts that are usually in line with periods of increasing concerns about the limit of US government debt, especially in 2011 and 2013 and in 2023.

Wong noted that there are still several months before the United States reached X-Date.

The US House of Representatives approved the main tax reduction package that can see The roof of the debt raised by $ 4 trillion, Waiting for the approval of the Senate.

In the May 9 Message, bessent He urged Congress leaders To expand the roof of the debt by July, before the Congress left its annual stretching in August, in order to avoid the economic catastrophe, but it warned “the great uncertainty” in the specified date.

“There is still enough time for the Senate to pass its copy of the draft law by late July to avoid the failure of technical payment in the US Treasury,” Wong added.

During the debt ceiling crisis in 2023, the US Congress A draft law suspends the roof of debt Just a few days before the US government concluded the failure to pay technical payment.

In the past, the United States has seriously approached the failure to pay, but in every case, Congress was behaved at the last minute to raise or suspend the ceiling.

Moody’s earlier this month It reduced the American sovereign credit rating To AA1 from AAA, citing the deterioration of the government’s financial health.

Wong warned that the Senate passes the draft law in a timely manner, as increasing the huge ceiling will raise the treasury supply, restoring the state’s financial deficit in the spotlight.