Wall Street Finally Frets Over Shutdown with Spike in U.S. Credit Default Swaps

From BusinessWeek:

The above chart, created by Bloomberg LP’s chief economist, Michael McDonough, plots the cost of a five-year U.S. credit-default swap against the cost of a one-year swap. These credit-default swaps are basically an insurance policy for people who hold U.S. government bonds. . . . As the chart shows, the prices of both five- and one-year credit-default swaps have spiked in recent days. This reflects the “credit deterioration” presumably brought about by the congressional impasse. (That blue line is the number of Bloomberg Wire stories mentioning “government shutdown near.” It, too, has spiked.)

 

Source: Wall Street Finally Frets Over Shutdown—and It Should (BusinessWeek)