MONEY MARKETS-Early Nov. T-bill rates rise as debt limit looms
Interest rates on U.S (Other OTC: UBGXF – news) . Treasury bills due in early November rose on Friday as the government approached its borrowing cap, and there were no immediate signs Congress will approve a proposal to raise it.
Adding to the upward pressure on T-bill rates was a broad sell-off in U.S. Treasuries as investors jumped into stocks and other risky assets on upbeat corporate results and an interest rate cut from China.
There are hopes that if Republican Congressman Paul Ryan were to win the race for speaker of the U.S. House of Representatives, the debt ceiling deal would materialize before the deadline.
Treasury Secretary Jack Lew has said the government would exhaust its borrowing capacity by Nov. 3, while analysts forecast the Treasury would not have enough cash to meet its debt payments in mid-November.
Republicans are scheduled to nominate a new speaker on Oct. 28, with a vote by the full House on Oct. 29.
“A Ryan Speakership has become clearer. That’s played into people’s psyche,” said Lance Pan, director of research and strategy at Capital Advisors Group in Newton, Massachusetts.
Interest rates on T-bill issues due Nov. 5 and Nov. 12 were up 2 basis points from late on Thursday at 0.0800 percent and 0.1350 percent, respectively, according to Tradeweb.
About $56 billion worth of bills are scheduled to mature on Nov. 5 and another $78 billion are set to come due on Nov. 12, according to Reuters data.
Rates on T-bills that mature after Nov. 12 into early March were quoted at zero to 0.0250 percent.
“While the probability of an actual missed payment may be low, the cost could be high for investors whose cash or collateral management strategies depend on timely maturity payments for T-bills,” Citi analyst Andrew Hollenhorst wrote in a research note on Friday.
The $2.7 trillion money market fund industry, which is a major holder of U.S. T-bills, has been tracking the development on whether the debt ceiling would be raised. (Reporting by Richard Leong; Editing by Chris Reese)
By Richard Leong