As the United States faces negotiations over its $31.4 trillion debt ceiling, Wall Street is preparing for potential economic tremors that could result from a debt default. Financial institutions, including Citigroup and JPMorgan Chase, are concerned about the possible impact on the global financial system, as U.S. government bonds are a key component. A default could lead to volatility in equity, debt, and other markets, as well as impact the secondary market for Treasury positions. Banks, brokers, and trading platforms are developing contingency plans to mitigate risks, including strategic planning for payment handling of Treasury securities and assessing the potential impact on client contracts. The Securities Industry and Financial Markets Association (SIFMA) has outlined a detailed playbook for key stakeholders in the Treasury market to navigate the uncertain terrain of potential missed Treasury payments.
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