Treasury Bill Rates at Almost Record Low as Debt Ceiling Reached

Monday, 16 May 2011 10:22 AM

May 16 (Bloomberg) -- Treasury bill rates were at almost record lows as the U.S. reached its federal borrowing threshold and a congressional vote loomed in the next few months on raising the nation’s $14.3 trillion limit.

Six-month rates were at 0.07 percent, compared with the record low 0.0305 percent set on May 7, as Treasury Secretary Timothy F. Geithner said he has taken action to stave off the federal debt limit until Aug. 2, using accounting measures that involve two retirement funds. Three-month bill rates were at 0.02 percent, almost the lowest since they went negative during the financial crisis.

“The debt ceiling issue continues to keep bill rates remarkably low,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “With the cuts in issuance for short-term securities. demand for paper in the front end demand remains firm for bills.”

Ten-year note yields were little changed at 3.18 percent at 9:47 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent note maturing in May 2021 dropped 2/32, or 63 cents per $1,000 face amount, to 99 17/32. The yield fell on May 13 to 3.13 percent, the lowest level since December.

Bill supply has slid since February after the Treasury eliminated $195 billion in short-term debt it sold on behalf of the Fed to help avoid exceeding the U.S. debt limit.

Geithner wrote lawmakers today to say he has declared a “debt issuance suspension period,” a technical measure that allows him to free up borrowing room from the Civil Service Retirement and Disability Fund and the Government Securities Investment Fund. The steps, widely expected as Republicans and Democrats argue over when and how to raise the debt limit, won’t affect retirees or government operations.

President Barack Obama said on CBS’s “Face the Nation” in a segment taped May 11 in Washington for broadcast yesterday that failure to raise the U.S. debt ceiling might disrupt the global financial system.

--Editors: Dennis Fitzgerald, Dave Liedtka

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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