It's very difficult to contemplate the market reaction of a US
For those not familiar with this pattern, here's a chart of the VIX (volatility, blue line) and the inverse of US borrowing costs (red line). When volatility surges (as frequently happens in a panic) people buy Treasuries like crazy.
It seems safe to assume that a default would cause a major crash of risk assets (stocks, etc.), but what about Treasuries?
The presumption is that a default causes a spike in rates, but that assumption is due in part due to thinking of the US as a normal 'credit' (for most entities a default would be associated with a rate spike).
But a rate spike in a panic would be exceedingly abnormal. SocGen's Kit Juckes aptly put it in a tweet.
@jamesgrickards @thestalwart hmm... risk aversion with higher Tsy yields will, I suppose, be the 9th circle of debt super-cycle hell....
— kit juckes (@kitjuckes) January 13, 2013
Of course we really don't know what would happen. It would be unprecedented in modern finance.