Rates on the Treasury’s shortest-maturity obligations slid below zero as a deal to extend the government’s borrowing authority stemmed investors’ concern that a political quagmire could trigger a default or delayed payments on the debt.

Rates on Treasury bills maturing Nov. 12, viewed by many as being at most risk of payment issues if political gridlock prevented a deal, traded as low as negative 0.01 percent Tuesday, down from as high as 0.13 percent Monday and from a seven-month high of 0.17 percent on Oct. 19. The rate on the bill due Nov. 5 fell to negative 0.01 percent.

The White House and top lawmakers from both parties reached a deal to avoid a default after Nov. 3, the date Treasury Secretary Jacob J. Lew had expected the U.S. would reach its debt limit. The accord will give the government new borrowing capacity until March 2017 and includes a two-year agreement on spending, aides from both parties said. House and Senate Republican leaders presented the plan to members Monday night and a draft of the bill was later posted on the White House website.

“With optimism about a deal being reached, there is less headline risk associated with owning some of these November bills,” said Kenneth Silliman, head of U.S. short-term rates trading in New York at TD Securities, one of the 22 primary dealers that are obligated to bid at U.S. debt sales. “Now the market is focusing on the short-term issue of lack of bill supply again.”

Bill Auction

The Treasury sold $5 billion of four-week bills Tuesday at a rate of 0.01 percent, matching the lowest amount offered at an auction since at least 2001. The size of bill offerings has been cut in recent months, after peaking this year in July at $45 billion, as the Treasury Department worked to keep under the debt limit. Wall Street strategists have said they expect the auction sizes to begin rising again once the debt-deal bill is passed.

After coming at zero percent, the lowest allowed by the Treasury at a debt sale, the four-week bill auction rate on Oct. 20 surged to 0.12 percent as investors shunned the debt amid concern that a failure to raise the debt ceiling could leave the Treasury unable to make good on these obligations.

In May, the Treasury had announced plans to increase bill issuance to ease distortions in money markets given a dearth of short-term, high-quality assets and heightened demand. Those plans were temporarily put on hold as Democrats and Republicans wrangled over a bill to raise the borrowing limit, and the Treasury used extraordinary measures to remain under the cap.

— With assistance by Wes Goodman