Even as tariff chaos dominates headlines, investors are quietly hedging against a deeper threat: U.S. fiscal instability. One-year credit default swaps (CDS) on U.S. Treasuries have spiked to 52 basis points—just shy of levels seen during the 2023 debt ceiling standoff, and the highest (outside of crisis moments) in over a decade. The outstanding volume of CDS contracts has jumped by $1B this year to $3.9B, the second-highest since 2014.
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This reflects more than just noise. While most analysts still dismiss a true default as unlikely, the rising cost of insuring U.S. debt signals growing concern over political dysfunction and the unresolved debt ceiling. Treasury has already hit its statutory borrowing limit, relying on "extraordinary measures" to stay afloat. But time is running out. With no durable fiscal deal in place, credit stress is bleeding into markets—and adding pressure to Washington’s already precarious fiscal credibility.

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