Money markets us t bill rates rise before debt limit vote

← Homepage

(Recasts first paragraph, adds details, quote)By Richard LeongNEW YORK Oct 28 Interest rates on U.S. Treasury bills rose on Wednesday in advance of a congressional vote on a federal budget and the debt ceiling, which would allow the government to issue more T-bills before it exhausts its borrowing limit next week. Six-month T-bill rates reached their highest in over five weeks, while one-year rates hit their highest in 3-1/2 weeks."The supply squeeze might ease as early as next week," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. A tentative deal struck on Monday involves a two-year federal budget and extends the Treasury Department's borrowing authority until March 2017.

Congress must approve the deal. The House of Representatives is tentatively set to vote Wednesday while the Senate has yet to set a time. Treasury Secretary Jack Lew said the government won't be able to sell more debt by Nov. 3, while analysts projected the government will run out of cash by mid-November if the legal borrowing cap, currently at $18.1 trillion, is not increased. Since September, the Treasury has reduced T-bill supplies by over $200 billion in anticipation of being pushed against the debt ceiling. It also delayed a two-year note auction to make room for short-term federal borrowing.

If Congress approves a debt ceiling increase, the Treasury can ramp up sales of T-bills to replenish its coffer. On Monday, the Treasury said it had $54.3 billion in cash on hand.

Analysts said the Treasury could sell an additional $100 billion in T-bills in the next couple weeks once the deal is approved. Six-month T-bill rates were up 2 basis points at 0.200 percent, their highest since Sept. 17, according to Reuters data. One-year T-bill rates were 3 basis points higher at 0.2975 percent, their highest since Oct. 2. One- and three-month bill rates were up as much as 2 basis points from late Tuesday.