The financial industry has prepared for such a crisis before. But this time, the relatively short time frame for reaching a compromise has bankers on edge.
U.S. government bonds underpin the global financial system so it is difficult to fully gauge the damage a default would create, but executives expect massive volatility across equity, debt and other markets.
Banks, brokers and trading platforms are prepping for disruption to the Treasury market, as well as broader volatility. SIFMA has considered several scenarios. The more likely would see the Treasury buy time to pay back bondholders by announcing ahead of a payment that it would be rolling those maturing securities over, extending them one day at a time. That would allow the market to continue functioning but interest would likely not accrue for the delayed payment.
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