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.
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.
- Market becomes increasingly unsettled without government data during shutdown
- Short-term Treasury Bill interest rates have almost tripled: A sign of things to come?