Why the Market Is Not Afraid of a U.S. Default

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Oct. 7 (Bloomberg) -- On today's "Chart Attack," Bianco Research's James Bianco and Bloomberg's Adam Johnson look at why the market is not worried about a U.S. default. They speak on Bloomberg Television's "Street Smart." (Source: Bloomberg)

A time for chart attack, were we have a pair of charts today that will make you smarter.

Jim bianco is here with us.

Even talking about default seems totally absurd.

What do you make of that action?

Cvs spreads, if you look at them half -- have risen him -- have risen.

If you look at the debt ceiling debate of 2011, we are well below the average we saw that in.

The average is not -- the markets are not worried.

They were even more worried coming off the fiscal debate last year.

You can barely see it, up to about 45 basis points.

It's still only half of the 90 basis points we saw.

Why are we also sanguine about this?

Rex i don't think anybody expects there's going to be default grade if we have a dealer don't have a deal and october 17 comes and goes, we don't have enough money to pay the debt on this country.

In other words, we have enough coming in.

About 35 billion needed for debt service.

We have enough money if we prioritize payments, we slide past that eight for a long time.

The next chart shows people aren't really worried.

Where does it sit?

It's the largest bond market in the world.

People are not very worried about that.

We don't see a mass of people rush into the market to say i have to buy myself protection because there's going to be a default soon.

Look at that.

Italy is the third largest country in europe, yet i can't even do that math area what does that work out to?

People are much more worried there will be a default in italy than in the united states, even though we are supposedly a week or so away from the big disaster scenario.

The thing that is so absurd is, i don't care if you are republican or democrat, the fact is they can make it go away with a vote and a signature.

No problem.

You can make it go away with a vote and a signature.

You can make it go away with a prioritized signature.

If freeman -- if payment prioritization becomes an issue, we prioritize the payments and pay the debt.

The shutdown can go on for a long time.

Without default, it could be very bullish for treasuries.

The market taking a leg at

This text has been automatically generated. It may not be 100% accurate.


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