Treasury debt ceiling clock | Financial Times

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It is with deep irritation and regret that we report the following: The markets are forcing us to pay more attention a certain deadline this is getting closer for the US government.

Treasury yields are trading broadly against comparable repo-based benchmark rates for early June, JPMorgan highlighted in a Monday note:

Short-dated Treasuries aren’t just cheap, they are 40 basis points cheap, according to JPMorgan:

Treasury bills maturing in early June fell further, with June 6 bills down 40 basis points versus SOFR maturing today amid concerns over slow progress in ongoing debt ceiling negotiations . . . we believe that there is still a lot of work to do before the x date and so on this could be a bumpier ride than markets are currently pricing in, with bullish implications for Treasuries. As a result, we recommend holding long positions in 5-year Treasuries.

To summarize some previous AV posts: a technical default on Treasuries would undoubtedly be very negative and cause all kinds of problems. But it could be bullish for Treasuries. Because while a US default would be bad for US debt, it could easily be worse for every other financial market.

Gotta love a good reserve currency story arc.