J.​P. Morgan Securities published a brief entitled, "Q&​A on a US Treasury Technical Default." They write, "​In a note published earlier this year, we provided an overview of the debt ceiling debate, the history of previous episodes, and possible market implications of rising fears of, or the actual occurrence of, a technical default by Treasury (​see "What would Alexander Hamilton do?" 3/​15/​17). In this note we review some of the operational and more technical aspects of a failure to pay.... Considering October 13 as the "​drop dead" date and assuming any technical default is short-​lived, bills maturing in early- to mid-​October appear to be most at risk of being the first to default if the debt ceiling is not raised.... We should state upfront that prior debt ceiling debates have never resulted in a technical default, and we do not think it is likely to occur.... As in prior episodes, we expect there will be a cheapening of Treasuries versus comparable assets.... Yields on bills that mature in the potential default window are also likely to head higher. We note that there are no cross-​default provisions on Treasuries, so we are likely to see localized dislocations -- for instance, 1-​month bills are likely to cheapen substantially relative to longer-​maturity bills heading into the deadline.... There are also likely to be selective dislocations in the repo markets -- while we expect GC repo to head higher, haircuts applied to various bonds will likely differ, with bonds with mid-​April or mid-​October maturities incurring larger haircuts.... The implications of a US government default are complicated for MMFs, but ultimately we believe these funds would not be forced to liquidate Treasury securities in a technical default. Taxable MMFs are significant owners of short-​term Treasury debt, with holdings of about $​679bn as of July 31, the most recent date for which we have data. Of this amount, $​111bn was held in Treasuries maturing in October, with most of this amount ($​67bn) held by Treasury-​focused MMFs. Based on these July month-​end numbers, Treasuries maturing in October comprised about 11% of all Treasury MMF holdings, 2% of all government funds, and only 2% of all prime funds. Neither Rule 2a-​7, nor any of the criteria governing rated funds' investments explicitly requires immediate liquidation upon default. The decision to sell-​or-​hold would most likely be left to the discretion of the boards of directors of individual funds. In the case of a solvent, high-​quality government issuer facing a temporary payment delay, we believe few fund boards would choose to liquidate defaulted securities at distressed levels. Likewise, fund ratings criteria include provisions giving managers reasonable cure periods for dealing with defaulted securities."

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