LONDON Oct 11 The cost of insuring against a
U.S. debt default dipped on Friday as prospects politicians in
Washington will reach a deal to lift the country's debt ceiling
Five-year credit default swaps tightened 10 basis points on
the day to 30 bps while one-year CDS was 7 bps narrower at 60
bps, according to data provider Markit.
Still, the fact that one-year CDS was twice the rate of the
five-year contract reflected lingering doubts that a deal to
raise the country's borrowing limit will be reached by Oct. 17
when the government will effectively run out of cash.
In normal circumstances, it is costlier to buy longer-term
credit protection. The current curve inversion - considered a
classic sign of credit stress - reflects investors' concern over
a looming default.