Cost of insuring against US default hits record high
The cost of insuring US debt against a default in the next year has hit a record high.
The figures have surpassed highs reached during the 2008 financial crisis.
A stalemate in Washington over raising the country’s $14.3 trillion debt ceiling led calls for Congress to “lift the cloud of default” over the world’s biggest economy.
Republicans and Democratic leaders are scrambling to find an agreement with less than a week before the government hits its borrowing limit approved by Congress, triggering a possible default.
If an agreement is not reached it could have grave repercussions for economies worldwide including Ireland.
One-year US credit default swaps (a form of insurance) rose to a record high of 85 basis points, up 8 basis points today, according to figures from Markit.
Timothy Geithner, the US Treasury Secretary, said earlier this week: "The most important thing we can do right now to safeguard financial stability is lift the cloud of default hanging over our economy."
He was speaking after releasing the first report of the Financial Stability Oversight Council (FSOC), a group of regulators charged with guarding against a repeat of the 2007-2009 financial crisis.
The switchboard at Congress almost crashed yesterday as Americans voiced their anger at the stalemate in Washington, according to reports in the US.