One-month Treasury yields fall to Oct. lows as debt ceiling worries grow

NEW YORK: One-month Treasury yields fell to their lowest levels since October on Monday as investors appeared to grow increasingly concerned about a potential standoff over the US debt ceiling.

The yield of the 1-month Treasury, which started the month near 4.7%, fell to 3.30%. Three-month Treasuries, meanwhile, eased to 5.08%, roughly in line with where they were trading in mid-April.

“People are focusing increasingly week-to-week on the summer and the debt ceiling deadline, and that is increasingly impacting what could be some idiosyncratic moves in the Treasury market,” said Fran Rodilosso, head of fixed income ETF portfolio management at VanEck. “There’s a growing sense that there’s not a lot of common ground this time.”

US tax collections are currently trending roughly 30% below last year’s level, raising the possibility that the United States will reach its borrowing limit as soon as the first half of June rather than later in the summer, according to Goldman Sachs Global Investment Research.

The House of Representatives is expected to vote on a Republican-led debt and spending bill this week.

Market concerns over a debt default pushed the price of insuring Treasury debt through credit-default swaps to their highest levels in over a decade last week.

The yield on 10-year Treasury notes was down 5.2 basis points to 3.520%, while the yield on the 30-year Treasury bond was down 4.7 basis points to 3.731%.

The Chicago Fed National Activity Index slipped 0.19 in March, the same decline it posted in February, and slightly above market expectations for a 0.20 decline. The April reading of the Dallas Fed Manufacturing Index, meanwhile, was -23.4, nearly double the -12.0 economists were predicting and down from -15.7 in March.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at -62.9 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 4.6 basis points at 4.144 percent.