12 key points to consider on the debt ceiling and the markets
What are the potential market implications of a technical default?
As negotiations in Congress stretch out and investors worry more about a technical default, volatility could increase. Most Treasury yields likely would decline, although those maturing in the coming weeks (around the X-date) could rise sharply.
The institute also expects credit spreads to widen, credit defaults swaps to rise, and the dollar to potentially depreciate. Equity markets likely would view any technical default as a risk-off event and could decline until a clear resolution is achieved.