Cost to insure U.S. debt against default drops

LONDON | Thu Oct 17, 2013 6:33am EDT

LONDON Oct 17 (Reuters) - The cost to insure U.S. government debt against default fell on Thursday as lawmakers reached a last-minute deal to lift the borrowing limit.

One-year credit default swaps fell 7 basis points to 51 bps, according to data provider Markit. That compared with an intra-day high of 75 bps on Wednesday, which was the highest since July 2011.

Five-year CDS fell 5 bps to 32 bps.

The temporary nature of the deal meant that short-term CDS continued to trade above longer-term ones. It is normally costlier to buy longer-term credit protection.

The current curve inversion - considered a classic sign of credit stress - reflects ongoing investor concern over a potential short-term default.

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