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Short-Term Treasury Bill Rates Surge as Auction Demand Falls

Qi Wang contributed to this post. 

As Congress and the administration continued to haggle over an agreement to end the government shutdown and raise the debt limit, short-term treasury yields rose and demand fell during Tuesday’s bill auctions. The three-month rate was the highest since Feb. 28, 2011, reaching 0.130%, up from 0.035% last week. The six-month rate also reached a new peak (the highest since Oct. 29, 2012), selling at 0.150%, up from 0.060% the previous week.

The $35 billion in three-month bills were sold yesterday at the lowest bid-to-cover ratio of 3.13 since July 2009, compared with the 4.52 average in the last ten auctions. The $30 billion in six-month bills were sold at a lowest ratio since October 2009, at 3.52 versus an average of 5.07 in the past ten sales.

The four-week bills will be auctioned off today and could be an additional harbinger of the volatility to come without a resolution to the debt limit issue. Early signs point to the yields on those four-week securities rising even higher, far surpassing those of bills with much longer maturities – an unusual circumstance.

Debt Limit: Market Reaction

As we approach BPC’s projected debt limit X Date range without a resolution, risks to markets, the economy, the federal government, and American citizens will grow. In these posts, we will attempt to report on these risks and their impacts as they occur.

2013-10-16 00:00:00


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