The Day the United States Defaulted on Treasury Bills « Donald Marron
In 1979, the United States defaulted on the repayment of three bond issues. The default was cured, but economists reckon that there was a lasting effect in upward pressure on interest rates.
The fourth big move was the day of the first default, when T-bill rates rose almost 0.6 percentage points (i.e., 60 basis points).There’s no indication this increase reversed in the days that followed (the vertical line on the chart is just a marker for the day of default). Indeed, using more sophisticated means, including comparing T-bill rates to interest on commercial paper, the authors conclude that default led to a persistent increase in T-bill rates and, therefore, higher borrowing costs for the federal government.
Would a default in August lead to a Carter-esque outcome for Obama? Or could there be blowback on the GOP, given the political antics surrounding the debt ceiling negotiations?