The cost of insurance against default in the United States has set a new all-time high

Business Insider reports a new record for the cost of default insurance in the US last week. This comes amid fierce debate among lawmakers over raising the country's debt ceiling, which already stands at more than $31 trillion. At the same time, the cost of credit default swaps in the US reached 152 basis points on Thursday, exceeding the previous peak of 134 points at the end of April. Essentially, buyers of credit default swaps are looking for insurance against a borrower who defaults on their debt.

While historically the US has never defaulted on its debt, investors are becoming increasingly nervous about the possibility as lawmakers have not yet reached an agreement on a debt ceiling. Treasury Secretary Janet Yellen has warned that the US could run out of money to pay its debt as early as June 1, leading to an unprecedented economic crisis.

Although the Republican-controlled House of Representatives passed Speaker of the House Kevin McCarthy's bill to raise the debt ceiling in exchange for an 8% cut in public spending in 2024, the proposal is unlikely to be passed by the Democratic-controlled Senate or signed by President Joe Biden. Democrats are looking for a bill that would raise the debt ceiling without strings attached.