That happens to T-Bills when the Goverment locks up over debt ceiling?

Some large T-Bill backed money market funds are avoiding T-Bills with maturity around the debt ceiling date. This is because they need liquidity to ensure the 1-1 dollar parity.

What will likely happen is, T-Bills with those maturity dates will have a higher risk premium and trade at lower values. People like Warren Buffet will gobble them up because they are still zero risk if you are willing to hold them for a few extra months while the debt ceiling issue is worked out. If things get really bad, the fed could offer to buy them with a haircut to ensure markets have liquidity.

The T-Bill is the cornerstone of the global financial system. Even with a technical default, no one believes the government won't eventually pay. And if you believe they won't, you should be buying physical gold, guns & ammo + food stuffs because it would be Mad Max'ish were that to happen.

The real issue is, if the government is in technical default, the credit rating agencies will downgrade the UST bill. That will result in higher interest rates on ALL government debt as it eventually revolves through. That means less money for existing programs.

This specific question I cannot answer, but I think in the long run, people with US gov bonds will get through OK, maybe just a delay payments and they may get a bit more from the US due to the delay.

I think for "main street", it will be a disaster. The fallout could rival the 1930's depression and people's 401Ks will probably loose 30% to 40% of their value.

Why Wall Street is still backing these GOP idiots is beyond me. We seem to be in a shift of US Party priorities. Seems the Dems are heading to support businesses while pushing social conscience. Seems some in the GOP is trying to do what they can to steal from Social Security/Medicare and crash world economy.

Possibly Nothing.

I've seen a few articles by constitutional lawyers that state the 14th amendment requires the US pay its debts, and the debt ceiling is a fiction (although, depending upon how the administration proceeds, it could take time to go through the courts; i.e., if the administration/treasury treats the debt ceiling as real).

https://www.theatlantic.com/politics/archive/2011/05/our-nat...

https://www.law.cornell.edu/constitution-conan/amendment-14

There is a line in the constitution that says "The validity of the public debt of the United States, ... shall not be questioned."

Some interpret this to imply that the courts could intervene in any case where legislative action would cause the US to fail to pay any existing debt. I think it's uncertain though, and I am curious what people more familiar with consitutional law think about this.

They might not pay out on time. The Treasury will have incoming cash and will have discretion over which obligations it does and doesn't pay. T-bills might very well get priority but I don't know.

If they don't pay there will be a market for them. Everyone will believe the debt ceiling will be somehow fixed and many players will be willing to buy T-bills at some discount -- probably very slight, but who knows? The Fed might also step in to buy them.

The general expectation is that Washington will avoid this in the first place but they're all getting dumber and I think the possibility of it happening eventually is no longer zero.

If you're trying to buy a new T-Bill, you're impacted in that new debt can't be issued so new T-Bills can't be issued freely. For existing debt holders? Yawn. US Tax is revenue is ~ $450 billion/month. US debt service is about ~$60 billion/month. What's impacted is new spending.

Related Planet Money (NPR) episode [0].

[0] Day of the debt. https://www.npr.org/2021/11/23/1058529788/day-of-the-debt

I'd like to add that it's not just T-Bill buyers. Banks tend to buy T-Bills for a place park cash. Even if you don't buy T-Bills you would be effected by a default if you have your money in a bank that's expecting some T-Bills to mature at the time of the (potential) default.

For all you newcomers, the debt ceiling debate is something that happens every few years and is a waste of everyone's time. It's brinksmanship on the part of the Republicans and Democrats, but it won't ever happen. They start cutting services, etc, and conserve cash way before anything happens and magically they get a new deal. It's political theater.

Plus the US Treasury can unilaterally create a $1 trillion coin and increase the debt ceiling that way.

I have been completely ignoring this nonsense since 2 or 3 iterations ago, don't get too sucked into this.

I don't have faith in much, but I'm sure that the Treasury will make bond holders whole. A substantial default would be the end of global capitalism, and every one of the right wing psychos know it.

also, the debt ceiling is always raised.