ZH: The cost of protecting against a default on US Treasuries for one-year has surged to 60bps this morning. This is the highest since the Debt-ceiling debacle in 2011 and worse than Lehman. The 1Y cost is the highest relative to the 5Y cost ever. However, many people look at the 60bps and shrug it off as de minimus, after-all, JCPenney trades at 1200bps and is still alive. This is a mistake. The price of protection for US sovereign debt depends on recovery expectations and the EURUSD exchange rate expectations. Based on current levels, USA CDS imply a 5.9% probability of default - the same as JCPenney in July.