Graphic: US Default Risk—Short and Long Term

Nice chart from Bespoke Invest on the risk of a US default, as measured by Credit Default Swaps—CDS).

Following the announcement of the debt ceiling deal, US CDS prices materially declined exhibiting an easing of default concerns.

It is important to point out that yesterday’s steep drop could be seen as ‘temporary’ relative to the 3 year trend (violet arrow), which reveals that the risks on the credit standing of the US has been on the ascent.

Nonetheless, last night’s debt deal has not helped US equities as the US S&P 500 slumped anew.

However, one would note that as US default risks have been on the rise over the past 3 years, so has gold prices.

So gold could partly be manifesting these concerns too (gold sizably declined yesterday in conjunction with the fall of US CDS).