Markets remain sanguine about risks of US default

Despite all the understandable concerns, market pricing suggests that most investors are still fairlyrelaxed about the chances that the US government will default on its debt. As it happens, we think thiscalm is justified, both because default is likely to be avoided, and because even if it is not, the widerimpact may not be as catastrophic as many fear. Nonetheless, this leaves plenty of scope for increasedvolatility and further falls in the prices of risky assets as the deadline for a deal approaches.