Debt default risk spooks Wall Street.

While the chances of the U.S. defaulting on its debt are shrinking, risks remain for the banking system and global financial markets. The U.S. markets and the economy are still facing uncertainty, and a default would be a disaster. Every financial instrument in the world is priced off of the risk-free rate of U.S. debt, and a default would risk sending short-term yields higher, while riskier assets and the dollar would likely fall. Lawmakers appear to be closer together on avoiding a default, but the government may not be able to pay all its obligations as early as June 1 if a deal is not reached.