U.S. government credit default swaps (CDS) spreads reached a peak on Wednesday (1st) as market worries grew over the partial shutdown of federal operations.
The six-month spreads increased by one point to 17 base points, marking the highest level seen since mid-July, according to information from S&P Global Market Intelligence.
The spreads for one and five years stayed at 21 and 42 points, respectively, marking their highest levels since July.
The shutdown started due to a breakdown in a funding deal resulting from a political deadlock. This has resulted in the halt of many government operations and puts numerous public jobs at risk.
This shutdown is not directly connected to the increase in the federal loan limit, unlike typical situations during debt ceiling tensions.
Nonetheless, the market has experienced an increase in CDS spreads this year due to additional uncertainties impacting the US.
First attempt to close ‘shutdown’ vote fails
The US government shut down on Wednesday, with an initial vote to end the shutdown failing due to disagreement between Democrats and Republicans in the Senate.
Democrats insist on including funding for the Accessible Medical Assistance Act (ACA) in the new budget to ensure continued access to healthcare services.
Republicans, in contrast, supported the Trump administration and oppose the plan, arguing that it would favor undocumented immigrants in the country.
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