Buckle up people, US default probability just increased from 0.1 to 1%. Remember it can't happen, it'll not be allowed to happen. It's against all natural law.
11.13 The Hong Kong exchange's clearing house has raised the "haircut" on US Treasury bills being used as collatoral. The discount has been hiked from 1pc to 3pc, meaning they are worth less as collatoral than before.
Brenda Kelly, senior market strategist at IG, said this move constituted a "warning shot" to the US that markets are starting to question its creditworthiness:
News that Hong Kong has raised collateral haircuts on US treasury bills appears to be something of a warning shot to US politicians. The implications are that US treasury bonds are considered broadly more risky and the Hong Kong exchange is clearly preparing for the worst case scenario – a US default. The more likely explanation is that Hong Kong is simply telling the US to get its act together.
News that Hong Kong has raised collateral haircuts on US treasury bills appears to be something of a warning shot to US politicians. The implications are that US treasury bonds are considered broadly more risky and the Hong Kong exchange is clearly preparing for the worst case scenario – a US default. The more likely explanation is that Hong Kong is simply telling the US to get its act together.
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