NEW YORK: Interest rates on US Treasury bills due in November jumped on Monday on worries the absence of a deal to raise the federal borrowing limit will result in the government delaying payments on its debt obligations.
About $235 billion of Treasury bill issues are scheduled to mature next month. Jitters about delayed repayments to T-bill holders in less than a month distorted the interest rates in this sector.
Last week, Treasury Secretary Jack Lew urged federal lawmakers to increase the statutory borrowing cap, currently at $18.1 trillion as the government will be unlikely to issue new debt after Nov. 3.
"It's all related to the debt ceiling," Tom Simons, money market strategist at Jefferies & Co. in New York said of the jump in November T-bill rates.
Analysts projected the Treasury will run out of cash by mid-November.
On the open market, the interest rate on the T-bill issue due Nov. 12 was last quoted at 0.0775 to 0.0850 percent , up 5 basis points from late on Friday, according to Tradeweb.
It was bid earlier as high as 0.175 percent, which was the highest on ultra short-dated government debt issues in two years, during the prior debt ceiling debate.
The Treasury had shrunk its T-bill issuance in anticipation the government would exhaust its borrowing capacity in the coming days.
On Tuesday, the Treasury will sell $5 billion in one-month bills for a second straight week, which was the smallest size for this T-bill maturity since 2001 when it adopted a single-price auction format for one-month bills.
Three-month rates are now lower than one-month rates, while interest rates on T-bills before Nov. 3 remained in negative territory.
On Monday, the Treasury sold $26 billion of three-month bills at an interest rate 0.015 percent, compared with zero percent at the prior two auctions.
It also auctioned $26 billion of six-month bills at an interest rate of 0.110 percent, the highest in four weeks.