Debt-Ceiling Standoff Warps Treasury Trading
Divergence between one-month and three-month bills is largest on record
By Eric Wallerstein and Matt Grossman, The Wall Street Journal, April 22, 2023
nvestors are piling into ultrashort-term Treasury bills to avoid getting caught up in the debt-ceiling drama.
Surging demand has driven one-month T-bill prices higher, sending the yield down to 3.313% from 4.675% at the end of March. Bills maturing in three months yield 5.105%—a record incentive for lending to the government for a couple months more, according to Tradeweb data going back to 2001…
If the limit isn’t raised in time, investors who own maturing Treasury debt might not be paid back right away. Most investors expect they will be made whole by the government later on, but even a temporary disruption would mean an unprecedented shock to the multitrillion-dollar funding markets relied on by banks and companies for managing their daily operations…
Weaker-than-expected tax collections so far this year have reduced the Treasury’s funding base, meaning the X date could come several months sooner than forecasters originally predicted. … [end quote]
I placed an order for Monday’s 13-week Treasury auction which is the subject of this article. Fidelity does not charge for Treasury auction orders.
https://www.treasurydirect.gov/auctions/upcoming/
The maturity date, 7/27/23, is right smack in the middle of the “X” date range when the government will default if the debt ceiling isn’t raised.
I’m not worried because paying interest on Treasury debt will be prioritized ahead of non-essential government functions (which were shut down in previous Congressional struggles).
Wendy