US debt default threatens economic catastrophe.

Wall Street banks and asset managers are preparing for potential fallout from a possible US debt default as talks over raising the government's $31.4tn debt ceiling intensify. The financial industry has prepared for such a crisis before, but this time, the relatively short time frame for reaching a compromise has bankers on edge. The ability to trade in and out of Treasury positions in the secondary market would be severely impaired, and even a short breach of the debt limit could lead to a spike in interest rates, a plunge in equity prices, and covenant breaches in loan documentation and leverage agreements. Banks, brokers, and trading platforms are prepping for disruption to the Treasury market, as well as broader volatility.