As the debt ceiling episode unfolds, we highlight a sharp increase in activity across the U.S. credit default swaps (CDS) market and infer the likelihood of a U.S. default from these market prices. Beginning in January 2023, we document a significant increase in U.S. CDS trading activity and...

We study the extent to which the perceived cost of losing the exorbitant privilege the US holds in global safe asset markets sustains the safety of its public debt. Our findings indicate that the loss of this special status in the event of a default significantly augments the debt capacity for...