Default By U.S. Government Seen As Possible, With Debt Ceiling Vote Delayed Posted: 05/27/11 01:52 PM ET
As lawmakers in Washington delay authorizing additional public debt, investors are treating the prospect of a U.S. government default -- while still highly unlikely -- as growing in probability.
Even as traditional market indicators suggest the government's debt is as secure as ever, bets that the Treasury will default are becoming more popular. And foreign investors seem to be displaying skittishness about their holdings of Treasury debt. With Congress showing little progress on a deal to raise the debt ceiling, some economists say the possibility of a default by the Treasury, once unimaginable, has now become a factor in investment decisions.
"It's still extremely unlikely, but it is now something that can be talked about. That moves us into a different world," said Mark Vitner, a senior economist at Wells Fargo. "It was unthinkable not too long ago."
In the last couple months, investors have piled into bets that the Treasury will default. The cost of holding one-year credit default swaps on U.S. debt -- insurance that pays out if the government misses a debt payment -- has skyrocketed, more than tripling since the beginning of April, the Wall Street Journal reported this week......................>>>>..........................>>>>.........................http://www.huffingtonpost.com/2011/05/27/debt-ceiling-government-default_n_868120.html
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