Price to Insure Nation's Debt Rises Sharply

Friday, 27 Sep 2013 01:38 PM

By Lisa Furgison

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The cost to insure the nation’s debt just got way more expensive.

According to the Wall Street Journal, the cost to insure $10 million of the U.S. government debt for one year is now $41,390. That’s six times more expensive than it was just last week.

The spike in price comes as investors fear the nation could default on its loans. The debate over whether to raise the debt ceiling is fueling these fears, as lawmakers argue about the best way to hand the nation’s debt.

The cost to insure the debt is based on complicated math formulae, known as credit-default swaps which protect against nonpayment.

The insurance quote is actually given in euros to protect investors in case the value of currency drops. Last week the cost to insure the loan was 5,000 euros, now it’s 31,000 euros ($41,390).

Investors are so nervous about government’s ability to make payments, the cost to insure the loan for one year is the same as protecting it for five years. It’s the highest price to insure the nation’s debt since 2011, which was the last time the debt ceiling was a hot topic in Washington.

Related stories:

GOP to Offer Plan to Suspend Borrowing Rather than Raise Debt Ceiling

Treasury Secretary to Congress: We Will Hit Debt Ceiling in October




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