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Debt ceiling drama

As the new #debtceiling drama unfolds, markets are starting to price that, although highly improbable, the risk of a U.S. debt default is not zero. With debt levels over gdp around 123%, and growing, and with interest payments increasing due to higher interest rates, the balance sheet situation of the USA is deteriorating. The debt limit will be negotiated and lifted by Congress, hopefully on time to avert a technical default, but the US bears the risk of seeing its CDS re rated upwards in line with a country that will increase its debt and may enter a recession, and therefore decrease its #gdp. Credit assets may also rerate accordingly.

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