Treasuries and Dow set for hammering on default fear

Yields on Treasuries have jumped and the Dow is tipped to open around 100 points lower after talks between the Democrats and the Republicans on the debt ceiling broke down on Friday night.

The yields on 10-year Treasuries were within touching distance of 3%, rising 1.5 basis points higher to 2.979%. Meanwhile with around three hours to go before the opening bell on Wall Street, futures indicated that the Dow would shed 90 points on open with the S&P 500 and the Nasdaq easing by 13.5 and 10 points respectively.     

The spike in Treasury yields comes after talks between Barack Obama and John Boehner, the leading Republican at Capitol Hill, on raising the $14.3 trillion (£8.8 trillion) collapsed late on Friday night.

US Treasury secretary Tim Geithner has said the next 24 hours are critical to avoid a meltdown in markets.  

In column for Wealth Manager's sister website, Citywire Global, the president of Lipper Advisory Services, Michael Lipper, underlined just how grave the US's debt problems had become. He pointed out that one-year protection against a US default is roughly double that of other AAA rated nations such as the UK and Germany.

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Quinn Bowman is a freelance journalist based in Washington DC and has been covering the on-going negotiations between the White House and Congress.