Wait. Weren't Treasuries Supposed to Be Really Safe?

The cost of insurance against a default on U.S. 10-year Treasuries have hit records in recent days as the impact of a government bailout of Fannie Mae and Freddie Mac has got (some very prominent) investors worried. The FT's Alphaville blog charts this rise:

What does Bernanke think of all this? Not much.

In yesterday's Senate testimony, Senator Evan Bayh, Democrat of Indiana, queried the chairman:

BAYH: My final question, here, as my time expires, there's been a recent increase in the price of credit default swaps on U.S. treasuries.

What do you think accounts for that? And should be a matter of some concern in the message the market seems to be sending about their confidence?

BERNANKE: It could well -- there's been a lot of movement in a variety of spreads; for example, the spreads between the newly issued and previously issued bonds and so on.

I wouldn't read too much into that. It's a very small change. I think it has more to do with liquidity in markets and other risk aversion, other types of behavior, rather than any sense that there's a default risk.

BERNANKE: That would be my guess.