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Debt ceiling, not tapering, is the bigger market risk

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Talk of a reduction in U.S. stimulus has been all the rage since Federal Reserve Chairman Ben Bernanke first uttered the 'T word' in late May, but as more worrying issues come into focus, analysts say the industry's favorite topic of conversation is set to change.

According to Mark Zandi, chief economist at Moody's Analytics, once investors find out whether the Fed will begin tapering following this week's policy meeting, the U.S. government's debt ceiling will come back to the fore.

"The debt ceiling will become a real problem by mid-October... I think [industry commentators] need to start talking a little more about that," said Zandi.

(Read more: Debt talks could get ugly, but sequestration?)

If Congress is unable to pass legislation on the debt ceiling in the coming weeks, Zandi said the issue could be more detrimental than the tapering fallout, which prompted a sharp selloff across global equity markets as investors ditched risk and piled into safe haven assets. Emerging market equity, fixed income and currencies were hit particularly hard.

"If Congress and the Administration don't come together pretty soon… if we don't have a piece of legislation on that in the next few weeks, that's going to be a real significant problem, much bigger than tapering," he added.

Forget taper, watch the Fed's forward guidance

The government has been bumping against its $16.7 trillion debt ceiling limit since May. But the issue has lurked in the background recently as worries over tapering and geopolitical issues surrounding Syria took precedent.

With the U.S. government's spending authority set to expire on September 30, and the Treasury set to lose its borrowing authority in mid-October, the issue is back in focus. The worry is that if investors lose confidence in the U.S. government's ability to run its finances, they will stop reinvesting in U.S. government debt.

(Read more: Markets expect taper lite, but what if it's taper zero?)

David Stockman, former director of the Office of Management and Budget under the Reagan administration, told CNBC's Talking Numbers earlier this month that the debt ceiling debate would likely become prominent again once discussions over Syria subside in Washington.

"We'll be right up to the midnight hour on the debt ceiling… I don't think it's going to be resolved ahead of time. We're going to be in another crisis and paralysis. Maybe we'll even breach the [debt] ceiling," he said.

Stockman said the U.S. economy could face a crisis scenario.

"We have an enormous fiscal crisis coming down the road... This thing isn't in remission. It's only abated temporarily. So I don't see… blue skies ahead," he said.

(Read more: Why tapering doesn't mean QE is going away)

This week, U.S. Treasury Secretary Jack Lew warned Congress that waiting until the last minute to raise the nation's limit on borrowing could lead to irrevocable damage to the economy.

His comments followed comments from U.S. President Barack Obama on Monday, who said he would not negotiate on raising the debt ceiling, paving the way for some intense debate.

By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie

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