Despite failure by U.S. lawmakers over the weekend to reach an agreement on raising the debt ceiling, the widespread view among analystsis that a deal will still done by the August 2 deadline.
As a result, U.S. Treasurys didn't experience a big selloff in the Asian trading session on Monday; 10-year yields edged up only slightly, while 30-year yields moved up to 4.31 percent.
Most analysts that CNBC spoke to were against buying insurance on Treasurys or shorting U.S. government bonds. Instead they said they would focus on the forex markets, which could see the biggest moves in the worst-case scenario—if the U.S. defaults and has its credit ratings cut.
"Insurance is a tricky issue because you know last minute insurance (is) always very expensive," Mikio Kumada, Executive Director at LGT Capital Management told CNBC on Monday morning.
To be fair, credit default swaps on U.S. debt are still cheap. Five-year swaps cost 58 basis points (bps). That means it costs just $58,000 to insure against a $10 million exposure to U.S. government debt.
But the market for CDS on U.S. government debt remains small with a total notional value of only $4.77 billion.
"The philosophical issue perhaps is who's going to pay you if the U.S. goes bankrupt," Kumada said. "So it depends on the sophistication level of the investor with these types of instruments."
Some investors have been looking to short Treasurys, but Dennis Gartman of the Gartman Letter thinks that's a bad idea as yields are more dependent on what the Federal Reserve does, rather than the nation’s debt situation.
"Everybody keeps trying to be smart, thinking USTs will drop because of these debt problems but it keeps going up," he wrote. "As long as the Fed doesn't tighten, and it's made clear it has no intention of tightening, it's very hard to be short bonds."
Gartman recommended selling the Euro and buying safe-havens such as the Swiss Franc and gold, which hit a new record highon Monday.
But LGT's Kumada noted that over the short-term, gold tended to have a strong correlation with other risk assets in the event of a large, unexpected event.
"I think if we get a no-deal situation then probably the safest place to be over a few days or how long it lasts will be cash, probably the yen, the Swiss franc and currencies like that, probably even better than gold," he said.
Andrew Economos, Managing Director and Head of Sovereign & Institutional Strategy Asia at JPMorgan Asset Management said he would recommend the dollar index instead of other safe havens.
"The dollar's awfully undervalued at this point," he said. "There's a huge short against the U.S. dollar so you might see a rebound in the dollar index and you might just see a pickup in risk assets in general."
Economos also advised going long on risk assets such as high-quality equities.
"This is probably a time to start looking to get invested rather than shy away from markets and add to very expensive hedges," he said.