Curve Collapse in T-Bills Shows Debt-Limit Angst Growing

With little more than a month until U.S. Treasury Secretary Steven Mnuchin’s “critical” deadline for addressing the debt limit, investor anxiety is beginning to manifest in shorter Treasury tenors. The spread between one- and three-month bills has collapsed to roughly 1.6 basis points, the flattest since February, as investors start demanding higher rates on one-month paper relative to three-month securities in order to compensate for default risk.

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