From Yahoo Finance: 2025-06-03 16:25:00

Investors are starting to see the US government’s risk of default on its $30 trillion debt as rising, with concerns about policymakers’ inaction. This could lead to higher interest costs for Americans borrowing for homes, cars, or businesses.

A new study by the Federal Reserve Bank of Chicago uses credit default swaps to estimate the risk of US Treasury default. The analysis points to the impact of political squabbling on US creditworthiness, with concerns about Congress making America’s fiscal position worse.

The risk of default in the US has peaked at different times, with CDS pricing suggesting a 1% risk currently. This risk could increase as the Treasury nears a potential default, impacting interest rates on mortgages and other loans. Congress must soon raise the debt limit to avoid a crisis.

Market concerns over America’s creditworthiness stem from the massive amount of borrowing the US government must do to finance deficits, as well as the handling of the debt ceiling by Congress. A repeal of the debt limit could eliminate the default risk and lower US interest rates.

Read more: What America’s default risk is costing you