The US Treasury said that once it had exhausted measures to avoid breaking the federal debt ceiling, it had no plans to distinguish which payments would be made and which US government debt would be put aside. But Wall Street has a different view.
Some strategists have told their clients that in a worst-case scenario, the option of giving priority to publicly issued US Treasuries or delaying the repayment of certain debts still exists.
Us Treasuries-the world's largest bond market-and their liquidity underpin the dollar's status as the global reserve currency, supporting their claim that Treasuries will take precedence over other debt.
Confidence that these payments will be a priority stems in part from the debt ceiling contingency plan that was once secret during the Obama administration, and the Treasury Secretary Janet Yellen's team now says it will not use it. Fed officials discussed the details during the heated debate about raising the government's borrowing ceiling in 2011 and 2013, according to minutes of the Fed's conference call.
The Treasury did not discuss what would happen if Congress failed to suspend or raise the debt ceiling. After a two-year moratorium on the debt ceiling, the U. S. government's debt reached $28.4 trillion in early August. Ms Yellen said earlier this week that special measures to avoid violating the restrictions would only last until sometime in October.
The United States "paid all its bills on time," Treasury spokesman Lily Adams said last Wednesday. "the only way for the government to solve the debt ceiling is to get Congress to raise or suspend the debt ceiling, just as they have done dozens of times before."
The Treasury market shows some signs of concern that Congress will not be able to act on time. Bills maturing in late October or early November yield higher yields than those maturing before or after, as investors demand more compensation for increased risk.