Here's why investors would keep buying US debt even in the event of a default

• Even if the US defaults, investors could end up buying more US debt, according to the Atlantic Council.
• Investors simply have no better alternative to America's massive bond market, the think tank said.

If politicians can't resolve the debt-ceiling stalemate and the US defaults on its debt, experts say it would spell disaster for financial markets around the world. But even in that scenario, investors wouldn't necessarily shun US bonds, according to a Tuesday report published by the Atlantic Council.

The reason is simple: There's no other alternative to US Treasuries.

Even in a crisis-level outcome, the issue with fleeing the American debt market is that no other similarly-rated government bond market is anywhere near the size. Germany, for example, has an AAA-rated sovereign debt market like the US, but as the chart below illustrates, it's one-tenth the size, and unlikely to ever catch up.

And the UK gilt market also isn't a viable alternative, given its small size but also issues around credibility stemming from last year's fiscal policy missteps.

China, meanwhile, is not nearly reliable, transparent, or liquid enough to be an alternative, according to the Atlantic Council.

It's possible that investors could opt to hold more cash, but even that's become a less attractive option given higher interest rates and sticky inflation.

To be sure, Atlantic Council senior director Josh Lipsky maintained that a default would be bad news for the US economy and markets all over. But something akin to a bank run on US Treasuries is an unlikely outcome.

"There simply are not enough safe assets available for investors to move off of Treasuries," Lipsky wrote. "This is one reason why flirting with a default is so maddening. The US government issues something the rest of the world desperately wishes it had."