NEW YORK (Reuters) - The United States would have at least 3 days to make up for any missed debt payments before it triggered payments on its credit default swaps, according to trade association the International Swaps and Derivatives Association.
There has been some confusion over whether the United States would trigger an estimated $4.77 billion in payments on its CDS if it skips a bond payment as it runs up against an August 2 deadline when the Treasury has warned it will run out of cash.
The Treasury would have at least 3 days to cure any default, under CDS document rules, Steven Kennedy, global head of communications at the association in New York, said on Tuesday.
“This grace period would apply if there was no grace period or if the grace period was less than three business days under the terms of the reference entity obligation,” he said.
The government may have more time if the Treasury bond documents specify a longer grace period.
Reporting by Karen Brettell; Editing by James Dalgleish