U.S. debt-ceiling standoff threatens stocks, bonds, cheap imports — even your money market fund

U.S. Treasury bonds are considered the ultimate risk-free asset: the most liquid financial securities in the world, the most widely used collateral in financial transactions, and the lynchpin of the U.S. dollar reserve currency status.

A default by the U.S. federal government could call these attributes into question, compromising the stability of the global financial system itself. We believe the risk of a Treasury default is low, but the consequences of this event, should it materialize, would be high: Less consumption and…