... and as Stifel's Brian Gardner confirmed just a few days later...
Federal revenues cover only 75 percent of outlays so at some point, without an increase in the debt limit, Treasury will be unable to pay all of the government's bills. It seems clear that Treasury will prioritize the payment of principal and interest on U.S. Treasuries, so the chances of a default on Treasuries is remote. Also, it is unfathomable that the government would not pay Social Security recipients or meet payroll of the American military. On any given day, however, Treasury would likely have to delay payments of some obligations. Depending on who the creditor is (a government contractor, veterans' benefits, other social safety net payments, etc.), delayed payments would likely increase political pressure which would, in turn, increase the chances of reaching a debt ceiling deal, but would also be accompanied by some economic disruption and possibly a downgrade in the credit rating of U.S. government debt.
... because despite all the posturing, the US can and will prioritize debt and interest payments and avoid a technical default, even if it means that some 20 million deep state bureaucrats go unpaid for a week or two.
But since we are dealing with hypotheticals, below is a quick snapshot courtesy of Curvature Securities' analyst Scott Skyrm who looks at what the impact of a US default (again, purely hypotehtical) would be on the repo market.
As Skyrm explains, in the Repo market, the debt ceiling dynamics boils down to the fact that no cash investor wants to hold a defaulted Treasury as collateral. As a result, cash investors will pull their cash from the market as the drop-dead date approaches, which according to Janet Yellen may be as soon as June 1, for the simple reason that there is a massive $80 billion net cash outflow from the Treasury on that day, one which tips the cash balance into the red.