MarketMinder's View:

"So conventional wisdom says hitting the debt ceiling makes the US a bigger credit risk and raises the likelihood of default, which should thus drive bond yields higher. Conventional wisdom is wrong, as it often is. Hitting the debt ceiling reduces the supply of US Treasurys, and demand is sky-high, so investors bid bond prices up and yields down.

This would not happen if there were a snowball’s chance of defaulting. What does the market know? Well, it knows Congress has raised the debt ceiling 109 times before. It also knows the 14th Amendment and judicial precedent force the Treasury to continue servicing debt with cash on hand and incoming tax revenue, which far outstrip interest costs, so even if Congress dithers a few months, Uncle Sam will keep paying his creditors.