But even though the government can avoid defaulting after May 16, by using accounting and cash-management maneuvers, markets will likely worry about Congress’s political will, many market participants say. If investors shun long-term U.S. government debt, interest rates would rise, which would drive up the government’s borrowing costs and hasten the risk of a default.

“Bond markets will start to get very nervous if we go beyond May 16 without a debt-ceiling agreement being reached,” said Ajay Rajadhyaksha, head of fixed-income strategy at Barclays Capital.

The issue presents a dilemma for those Wall Street executives most concerned about the U.S.’s long-term fiscal outlook. Republicans said executives prodded lawmakers to make cuts in the federal budget, as well as to raise the debt ceiling…

Republicans said this is part of a running dialogue that started when the GOP gained its majority in the House. “Wall Street understands that if we default on our obligations, our markets are going to crash,” said freshman Rep. Michael Grimm, a New York Republican who has served as a conduit between fellow first-year members and Wall Street back home. “They’re doing their job and talking to a lot of members.”