US debt ceiling crisis shakes bond market

'Some very sharp moves'

Bond markets have been closely watching the debt ceiling debate in US Congress and have shifted to account for the possibility of a default.

Short-term US Treasury yields reached two-decade highs last week, with the yield at auction on 21-day bills hitting 6.2%, the highest level for any US benchmark bond this century, according to Bloomberg. On the brink of defaulting on its debt, the US has been fast approaching the ‘X-date', the day when it will be unable to pay its bills, which US treasury secretary Janet Yellen has estimated to be between 1 and 5 June. Congress must vote to raise the amount it can borrow to pay for spending it has already committed to, also known as the debt ceiling, but negotiations have been fraught...