WEAPON OF MASS DESTRUCTION — If you look casually at the stock and bond markets right now, it doesn’t appear that investors have any concern at all over the fact that the United States could default on its debt for the first time in history early next month.

Stock prices are mostly stable and yields on Treasury bonds, even short-term ones, are not spiking. When investors sense impending disaster like this they usually dump U.S. debt, which sends bond prices lower and yields higher.

This suggests that investors, who have seen debt limit dramas play out multiple times in the last decade, assume that no matter how far apart the White House and congressional Republicans seem now, they would not be stupid enough to allow a completely avoidable default to wreck the global economy.

But look a little deeper and signs of stress appear. Spreads on one-year credit default swaps on U.S. debt hit an all-time high on Wednesday, surpassing anything seen in previous debt limit fights. The price for insuring against default on U.S. debt for five years hit its highest level since 2009.

So while the most visible areas of the market seem to be taking the view that the drama will end the way it usually does — with some last-second, buzzer beating deal — less immediately visible indicators show rising concern.

And that concern seems perfectly legitimate given a postponement in top-level talks and no obvious path to a deal.

The first thing to know about the debt limit — created during World War I to free up the U.S. Treasury to issue new debt without needing a congressional vote every time — is that it is now a deeply stupid and dangerous weapon of mass destruction placed in the hands of politicians who mostly have no clue how horrific an actual default could be.

Raising the limit, a snoozer of an event for most of the last century, has absolutely nothing to do with green-lighting more federal spending. It simply allows the Treasury Department to continue issuing securities — which underpin the entire global economy — to cover spending Congress already authorized.

Republicans repeatedly terrorized President Barack Obama’s White House after taking over Congress in 2010, leading to multiple debt limit battles including one that rocked markets and caused the first downgrade of U.S. debt in history in 2011. The GOP had a significantly less difficult time supporting debt limit hikes under former president Donald Trump, though a deal in 2019 did include two years worth of spending caps. That is probably the general area around which a deal could materialize this year.

The Biden White House and congressional Democrats would never accept anything remotely close to the dramatic budget cuts included in the bill McCarthy managed to squeeze through the House last month with exclusively GOP votes. That measure — if it exempts military spending and doesn’t slash entitlements like Social Security and Medicare as Republicans have promised — would require massive annual cuts in other areas of discretionary domestic spending.

Republicans know they have no shot at getting something like the House bill enacted into law. But McCarthy did pull off a remarkable feat by passing the bill and punting the issue to Democrats for a counter offer. That offer may eventually include a couple years of spending caps, return of unspent Covid stimulus money and permitting reform that Republicans want.

Officials in the White House and Treasury Department are very quietly trying to craft such a counter to the McCarthy bill that could win majorities in the GOP House, the Democratic Senate and wind up with President Joe Biden’s signature.

One big problem is no one is exactly sure when Treasury will run out of its current “extraordinary measures” to keep paying the nation’s bills.

Both Treasury and the Congressional Budget Office say this so-called “X-date” could be as early as June 1. But if it slips a little later, the payment of quarterly corporate taxes on June 15 should extend the drop-dead date significantly later into the summer.

Nobody on earth knows what would actually happen if Treasury missed payments on existing bonds, the technical definition of default. There is no safer haven in the financial world in times of crisis than U.S. debt, so it’s at least possible a default could actually boost the value of Treasury bonds.

But it could also send the stock market into a nose-dive, push an already slowing and inflation-plagued U.S. economy into deep recession and drag the rest of the world along with it. Republicans believe they have the upper hand in terms of public opinion about reigning in long-term debt and deficits. And they do.

But polls suggest Americans are able to separate the debt limit issue from broader questions about long-term spending. And debt limit brinkmanship has burned the GOP every time in the past. So all sides have incentives to cut a deal, which is why there is little obvious stress in markets. But the closer we get to June 1 without an agreement, the obscure signs of market pressure will turn into blaring sirens.

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at [email protected]. Or contact tonight’s author at [email protected] or on Twitter at @EconomyBen.

— Power grid can’t handle Biden’s climate rule, industry groups say: The Biden administration’s new greenhouse gas rule is designed to drive drastic changes in how U.S. power companies produce electricity — but utilities say it could escalate the risk of outages as it squeezes fossil fuel plants into retirement. Power producers are already warning that the rule threatens to compromise the power network’s reliability by pushing their older, dirtier coal and gas plants into retirement at an even faster pace than they are closing now. They say it’s especially worrisome if the plants aren’t replaced as quickly as they shut down.

— Elon Musk announces NBCU exec as new Twitter CEO: NBCUniversal executive Linda Yaccarino will serve as the next Twitter CEO, Elon Musk announced this morning. Yaccarino, who Musk said will start the job in about six weeks, will take the post at the embroiled social media site after more than a decade at NBCUniversal, where she served as chair of global advertising and partnerships at the company.

— Biden names historic Fed picks: President Joe Biden said today he will promote Federal Reserve board member Philip Jefferson to the central bank’s No. 2 position and nominate World Bank official Adriana Kugler to an open seat, as the Fed weighs its next moves in the fight against inflation. The appointments come amid rising pressure on Fed Chair Jerome Powell, who raised interest rates by another quarter of a percentage point last week in a move that will further slow growth and could increase pain in the turbulent banking sector.

INTERNAL HOPE — POLITICO’s Jonathan Martin went to Tallahassee to talk with Florida Gov. Ron DeSantis’ closest aides — and they pitched him on why the yet-to-declare candidate has a good shot at upending former President Donald Trump, despite polling and momentum trending in Trump’s direction.

“Everyone knows the majority of the Republican Party wants to move on,” said Generra Peck, DeSantis’ gubernatorial campaign manager and closest aide.

And they gave Martin some internal numbers that they believe back up their statements. The DeSantis camp surveyed three kickoff states — Iowa, New Hampshire and South Carolina — in the days after Trump was indicted in Manhattan last month. This was as Trump was getting his national polling bump and after months of the former president’s attacks on DeSantis. The governor still enjoyed a higher net favorability than Trump among likely Republican voters in all three states, according to the research.

DeSantis and Trump have similar favorable ratings in Iowa, but 24 percent of Republicans there have an unfavorable view of Trump while only 14 percent of Iowa Republicans feel unfavorably toward DeSantis.

Perhaps most notable in the conservative-dominated caucuses, DeSantis was viewed favorably by nearly 80 percent of those who call themselves “very conservative.” Trump’s unpopularity was even higher in New Hampshire, where independents can participate in either party’s primary, and in South Carolina.

But DeSantis has work ahead of him, even if those numbers hold up. As Martin writes, upon entering the race in the coming weeks, he will effectively have six months to forge a disparate coalition of GOP voters, nudge his non-Trump rivals out of the race, convince them to rally to his side, or at least resist deal-cutting with the former president, and then pursue the mano-a-mano campaign he needs to seize the nomination from a feral political fighter who craves winning like oxygen.

POWER BROKER — China’s special representative on Eurasian affairs, Li Hui, will visit Ukraine, Russia and several European countries next week as part of Beijing’s bid to act as a middleman in the war in Ukraine in spite of concerns over its neutrality, writes Nicolas Camut.

Li, who was China’s ambassador to Moscow for a decade until 2019, will also visit France, Germany and Poland to “have communications on the political settlement of the Ukrainian crisis,” ministry spokesman Wang Wenbin said at a regular press briefing. Li reportedly will be the highest-ranking Chinese diplomat to visit Ukraine since the war started.

In spite of being Moscow’s top ally, Chinese President Xi Jinping has sought to position Beijing as a peace broker between Ukraine and Russia in recent months, introducing a 12-point peace plan as a basis for negotiations.

But the EU and NATO have been critical of Beijing’s attempts to pose as a middleman, raising doubts over China’s ability to be a neutral intermediary. In March, a POLITICO investigation found that several Chinese companies, including one with ties to the government, had sent assault rifles, drone parts and body armor to Russian entities.

China’s Xi, who visited Russian President Vladimir Putin in Moscow in late March, had his first telephone call with Ukrainian President Volodymyr Zelenskyy on April 26. In the call, Xi reassured Zelenskyy that Beijing would not add “fuel to the fire” of the war, signaling that China would not provide direct military assistance to Russia.

DYING OFF — This winter and into the spring, over 3,400 sea lions have died in Peru due to a variant of avian flu. And they’re not the only ones. Recent mass mortality events have included mussels, antelope and sea urchins, among others. Animals are dying in droves with increasing frequency, often due to wild changes in climate and resulting effects. What can these deaths tell us about the current effects of climate change and the potential consequences for humans? Marion Renault reports for The New Republic.