Bond yields are just the beginning of debt ceiling impact

This all has real effects on government spending. Consider that on April 13, the US Treasury auctioned bills due in four and eight weeks. The spread between the two bills was 73 basis points; the $50 million of eight-week bills cost taxpayers about $450,000 more than if the bonds had offered similar yields. In April 2022, the spread between four- and eight-week bills was 13 basis points.


That extra interest may not sound like much, but higher yields on government debt issued in the next month and through potential negotiations mean the costs to taxpayers will soon be in the millions—and that’s before the potential economic effects of the outcome are factored in.

Biden is meeting with a group of bipartisan lawmakers today in an effort to coax Republicans into budget negotiations instead of hostage-taking. Moody’s estimates (pdf) that a prolonged default would push the US into recession and throw 7 million people out of work. Given the seeming fragility of the US economy during the current interest-rate hiking cycle, even a temporary default or a brief market crash could lead to disproportionate economic harm.

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