Chicago Fed, Report: What Does the CDS Market Imply for a U.S. Default? 

“As the current debt ceiling episode unfolds, we infer the likelihood of a U.S. default through the lens of the sovereign credit default swaps (CDS) market. Beginning from January 2023, we document a significant increase in U.S. CDS trading, accompanied by a spike in premiums. Accordingly, we estimate an increase in default probability from about 0.2–0.3% in 2022, to approximately 1% in 2023, a value that is generally lower than what we find for the periods leading up to the 2011 and 2013 debt ceiling episodes.”

“One important implication from this analysis is that a simple comparison of historical CDS spreads to gauge market expectations around the likelihood of a credit event could be complicated by the value of the cheapest deliverable bond. Currently, the cheapest to deliver bond is deeply discounted when compared to prior debt ceiling episodes, which has contributed to wider U.S. CDS spreads.”