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U.S. Sells Bills at Highest Yields Since 2008 Amid Supply Deluge

Alex Harris

The U.S. Treasury on Tuesday sold $96 billion of bills at yields unseen since 2008 and is preparing to sell a further $55 billion of short-term securities later in the day as it works to rebuild its cash balance with record-sized sales of short-term securities.

The government auctioned $51 billion of three-month bills at a yield of 1.64 percent, 6 basis points more than similar-tenor notes sold on Feb. 12. The amount of bids the sale attracted relative to the volume of bills on offer fell to 2.74, the least since Dec. 26. The Treasury also sold $45 billion of six-month debt at 1.82 percent, compared with 1.785 percent at the sale eight days prior.

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The market is being hit with a deluge of T-bills following the recent U.S. debt ceiling suspension, and that’s helping to push up the rates that borrowers demand. Concerns about the U.S. borrowing cap had forced the Treasury to trim the total amount of bills it had outstanding, but that’s no longer a problem and the government is now busy ramping up issuance. Financing estimates from January show that the Treasury expects to issue $441 billion in net marketable debt in the current quarter and the bulk of that is likely to be in the short-term market.

The Treasury is scheduled to sell four-week bills at 1 p.m. Tuesday New York time.

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