Wall Street Expects Treasury to Pay Oct. 17 Bills, Sifma Says

Bond-market participants expect the U.S. Treasury to pay $120 billion of bills maturing tomorrow regardless of whether a deal is approved to raise the debt ceiling, according to Wall Street’s largest lobbying group.

“Every expectation would be that Treasury will make timely payment tomorrow,” Rob Toomey, a managing director of the Securities Industry & Financial Markets Association, said today on a conference call. “The only way we would hear something specific is if they were not going to pay, but every expectation is that they will, so in that case, silence means they’re going to pay their obligation that is due tomorrow.”

U.S. stocks advanced and the yen weakened against all major peers amid speculation lawmakers will agree on a deal to raise the debt ceiling. House Speaker John Boehner will allow a vote on a Senate agreement to end the government shutdown and extend U.S. borrowing authority, Representative Kevin Brady of Texas, a senior House Republican, said today in an interview on Bloomberg Television.

“No decision has been made about how or when a potential Senate agreement could be voted on in the House,” Michael Steel, Boehner’s spokesman, said in a subsequent e-mailed statement. For procedural reasons, if the House goes first, the bill could reach President Barack Obama’s desk more quickly.

The U.S. sold $68 billion of four- and 52-week bills and of 189-day cash-management securities today in what may be the Treasury’s last opportunity to bring in new cash under the debt limit. Fitch Ratings put the government of the world’s biggest economy on watch for a possible credit downgrade yesterday, citing lawmakers’ inability to forge a deal.

The world’s largest money-market mutual fund managers, including BlackRock Inc. (BLK), Fidelity Investments and JPMorgan Chase & Co., have shunned Treasuries maturing in the next few weeks to avoid potentially being stuck with defaulted debt.

Rates on bills due Oct. 31 jumped yesterday to the highest level since the securities were issued in May. The rate increased 20 basis points, or 0.20 percentage point, to 0.51 percent, according to Bloomberg Bond Trader prices. The securities traded at a rate of zero as recently as last month.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christine Harper at charper@bloomberg.net

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