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Debt Ceiling Anxiety Tracker: Markets Start to Get a Bit Itchy

(Bloomberg) -- As investor angst over the U.S. debt ceiling builds with a little more than a month to go before crunch time, here are the charts you need today to gauge whether you should be more nervous now than you were yesterday. Let’s call it the anxiety tracker.

Bottom line: In small corners of the markets, investors are getting nervous.

One key monitor is how anxiety is beginning to manifest in shorter Treasury tenors, which mature around the time the U.S. would be expected to run out of money unless there’s a debt limit increase.

Debt Ceiling Anxiety Tracker: Markets Start to Get a Bit Itchy

Another way to look at it is the spread between one- and three-month bills. That gap has shrunk to around 2.5 basis points as investors start demanding higher rates on one-month paper relative to three-month securities in order to compensate for default risk.

Debt Ceiling Anxiety Tracker: Markets Start to Get a Bit Itchy

That’s not the only indicator we’re watching. The cost to protect against a U.S. default over the next five years through credit-default swaps has jumped to about 26 basis points, from 20 basis points a month ago. That means it costs 26,000 euros ($31,000) to insure 10 million euros worth of Treasuries against default. The expense reached 64 basis points during the 2011 debt-limit episode, which resulted in the U.S. losing its top credit rating from S&P.

Debt Ceiling Anxiety Tracker: Markets Start to Get a Bit Itchy

How bad is it?

Debt Ceiling Anxiety Tracker: Markets Start to Get a Bit Itchy

The Treasury Department has some large payments to make as it approaches its $19.8 trillion borrowing authority. On Oct. 2, it must account for $55 billion of Medicare, military and interest payments, as well as the settlement of $88 billion of 2-, 5- and 7-year note auctions.

It gets worse. Its cash balance has fallen by more than $100 billion since the end of July and is within $7 billion of the forecast included in the borrowing estimates released last month. A smaller cash balance means the government has less of a buffer to pay its bills in case of disruptions in debt markets.

Debt Ceiling Anxiety Tracker: Markets Start to Get a Bit Itchy