in the course of 2011 the niche market for CDS on US Treasurys sprang back into life. In the last days of July just over a thousand contracts were outstanding, with spreads running to 82 basis points. It was a fraction of what investors in Greek debt paid, but it was astonishing that the market existed at all. On July 31, 2011, Washington pulled back from the abyss. A budget compromise was reached that would impose automatic austerity if the two warring parties could not agree on cuts by the end of the year. Reluctantly, sufficient Tea Party radicals were won over to the Republican
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