Treasury Bill Sale Demand Shows Shutdown Impact Fading

The Treasury’s auction of $35 billion of one-month bills attracted demand at almost the pre-government-shutdown average for the securities this year as investor concern the U.S. may default ebbed.

The bills sold at a rate of 0.03 percent, down from 0.35 percent at the Oct. 8 sale, which was the highest since October 2008. Investors bid 4.31 times the amount of debt sold by the Treasury, compared with a more-than four-year low of 2.75 times at its Oct. 8 offering of $30 billion of the debt. U.S. lawmakers reached an agreement last week extending the nation’s borrowing authority to February, from Oct. 17, and reopening the government after a 16-day partial shutdown.

“There was a ton of cash on the sidelines waiting for the possibility of default to clear,” said Dan Mulholland, head of Treasury trading at BNY Mellon Capital Markets in New York. “The bill market really snapped back.”

Yields on U.S. government bills spiked last week as lawmakers pushed wrangling on raising the U.S. statutory borrowing limit to the day before the Treasury Department said it was set to run out.

Bids at the 39 auctions of one-month bills prior to the Oct. 1 government shutdown have averaged 4.41 times the amount of debt sold, Treasury data compiled by Bloomberg show.

Investors submitted bids totaling 4.03 times the amount of securities offered yesterday at a three-month bill auction. While that was up from the 3.13 times at an Oct. 15 offering of the debt, it trailed the average bid-to-cover ratio of 4.64 at 40 pre-shutdown sales of that maturity this year.

To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net;

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

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