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Investors on Tuesday dumped one-month Treasury bills due for payment after October 17, the date the Treasury Department has warned it will no longer have the cash to pay all of its obligations unless Congress raises its borrowing limit, known as the debt ceiling.
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If investors and traders judge Spanish bonds to be risky because Spain's government may default, they help make it more likely that Spain will indeed default, by raising its borrowing costs.
The markets also saw its exposure to Greece and raised its borrowing costs accordingly.
This month the government raised its borrowing target rather than bring forward promised but unpopular public-spending cuts.
The decline came at a time of anxiety about whether the United States would raise its borrowing limit.
If Greece loses its remaining A rating from Moody's, its bonds will be less prized by banks, raising its borrowing costs.
In particular, she urged the United States to raise its borrowing limit and pressed Europe to follow through with commitments to tackle its debt crisis.
Indeed, he implied, this would damage Germany by raising its borrowing costs, which at the moment are the lowest in the euro zone.
German officials have argued that any open-ended commitment to joint liabilities would encourage errant governments to profligacy, violate Germany's constitution and raise its borrowing costs.
International investors began to target Ireland as a weak link in the euro zone, raising its borrowing costs to unsustainable levels.
Treasury secretary Jack Lew is demanding action "very soon" -- with a fresh warning on Monday that America is running out of time to raise its borrowing limits.
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CEO of Professional Science Editing for Scientists @ prosciediting.com