Credit-default swaps on U.S. Treasuries climbed 7.9 basis points to 49.4 basis points as of 12:38 p.m. in New York, according to data provider CMA. That's the highest level since Feb. 1 and means it would cost the equivalent of 49,400 euros a year to protect 10 million euros of debt against default for five years.
Last week, Moody's Investors Service said Obama's plan to cut $4 trillion in cumulative deficits within 12 years may be a "positive" for the nation's credit quality and mark a reversal in the budget debate.
Financial Crisis
The U.S. is the only large AAA rated country that saw its debt rise during the crisis that until recently had no plan that would reverse the trend, Steven Hess, senior credit officer at Moody's, said last week.
The negative outlook by S&P means that the firm views a one-in-three chance it will cut a borrower's rating within a two-year horizon, David Beers, S&P's global head of sovereign and international public finance ratings, said in a Bloomberg TV interview.
"This debate in the country really is just beginning and hard choices are going to have to be made," Beers said. "We're not saying that no agreement is possible. We're just unsure as to the time frame and whether it's going to be seen as credible not just by us but by the broader marketplace."