NEW YORK (Reuters) – The probability of a U.S. default has declined to its lowest since January, according to MSCI estimates, as a debt ceiling deal gets closer to the finish line.
The one-year market implied probability of a default as of market close on May 30 stood at 1.3%, the lowest level since January, Andy Sparks, Head of Portfolio Management Research at MSCI, said in a statement on Wednesday.
The default probability – calculated using credit default spreads from S&P Global Market Intelligence – peaked at 4.3% on May 11.
“This probability plunged over the past two days as the market became more convinced that a legislative solution to the debt ceiling crisis is at hand,” Sparks said.
The U.S. House of Representatives is due to vote on Wednesday on a bill to lift the government’s borrowing cap.
Without congressional approval, a potential default could come early next week.
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(Reporting by Davide Barbuscia; Editing by Chizu Nomiyama)