Debt ceiling talks deadlock as default deadline nears

The exterior of the US Treasury Department building on March 13 in Washington, DC. Chip Somodevilla/Getty Images

Nearly five months before the US hit the debt ceiling, a small Treasury Department team began alerting senior officials to the early effects already being felt in the US financial system.

The cost of insuring US debt, as measured by the price of credit default swaps, was rising, a sign that investors were beginning to see US bonds and other securities as increasingly risky.

This early warning — and others over the past month as swap prices have risen — came from the Treasury Department’s trading floor and its eponymous team of nine financial analysts tasked with monitoring and analyzing the markets. global financiers to inform the policy work of senior Treasury Department and White House officials.

As the US rapidly approaches a potential default date in early June, senior US officials are increasingly relying on the trading floor to watch for signs of financial market disruption.

“In the same way that a doctor wants to understand a patient’s vital signs as he thinks about how to treat him, at the Treasury he keeps up to date with understanding the different ways in which the economy is healthy. or unhealthy. And part of that is understanding the market,” Deputy Treasury Secretary Wally Adeyemo told CNN.

“So we’re spending a lot of time with them to better understand what the costs are today, to make sure that we’re able to share that information with Congress, to prevent us from putting ourselves in a position where, for the first time in our history, we are unable to pay all our obligations on time,” he said.

This work begins each day before dawn when staff members take turns getting up around 3:30 a.m. ET to compile data on market developments overnight and begin calling contacts working in European markets and Asians.

Around 7 a.m. ET, that data and information lands in the inboxes of top White House and Treasury Department decision-makers.

At 9 a.m. ET, before U.S. markets open, Treasury Secretary Janet Yellen and her leadership team are meeting virtually with the trading floor and other key Treasury Department aides for a briefing on the state of financial markets and the issues to watch that day.

Over the past few weeks, this daily briefing has focused heavily on the repercussions of the debt limit standoff, from updates on Treasury bill auctions to market reactions and comments from market analysts. and economists.

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