So what would happen in the unlikely event the US defaults

Tom McKay

So what would happen in the unlikely event the US defaults? 1. A series of legal triggers, potentially transmitting the default to many other markets. 2. The repo markets will seize up, causing the rapid closing of trades and then fire sales of securities and further price declines. (keep in mind that at least $2.8 trillion of Treasuries serve as collateral for repo and reverse-repo loans, according to Fed data). 3. Treasuries may no longer be eligible as collateral for repo agreements. 4. A wider impact in bond yields, pushing up borrowing costs worldwide. 5. About half of the U.S. debt is held by foreign governments, central banks and other overseas investors, according to Treasury data. A default would throw those holdings into question as well as the dollar's status as the world's reserve currency. (VIEW LINK)


About this contributor

Tom McKay

Tom McKay

Managing Director and Co-Founder, Livewire

I'm the Managing Director and Co-Founder of Livewire. I'm passionate about collecting and curating the markets most informed insights every day so that our members can discover new investment ideas. If you would like to get in touch - please use...

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economy usa default repo

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