"Signs that the fiscal impasse in Washington might be thawing sparked a strong price rally in very-short-term Treasury bills Thursday, but prices of longer-maturing T-bills fell as investors saw the risk rising of another stalemate at the end of the year.
Investors bought the U.S. debt securities after lawmakers indicated they were closer to a deal for a short-term increase in the country's borrowing limit, which reduced fears over a U.S. default in the near term. The Treasury Department has said it could run up against its borrowing limit around Oct. 17.
The prospects for an agreement cheered financial markets Thursday, stemming a multiday selloff in some T-bills. The yield on the T-bill due Oct. 17 topped 0.5% earlier Thursday but has since tumbled to as low as 0.215% and recently traded at 0.38%, according to Tradeweb. Yields fall as bond prices rise.
The T-bill due Nov. 7, the benchmark one-month T-bill, traded at a yield of 0.2% Thursday, down from 0.279% Wednesday. The yield rose above 0.35% on Tuesday, the highest level since the depths of the financial crisis in 2008.
But a potential deal for a six-week extension of the U.S. borrowing limit merely puts off the threat of default until early December, said some analysts.
The T-bill due Dec. 19 yielded 0.11% Thursday, higher than the three-month T-bill, which was yielding 0.04%, and the six-month T-Bill's 0.06%.
Investors sold longer-maturing U.S. debt, which is generally considered a safe-haven investment, as fears about a default abated. The benchmark 10-year note's yield rose to the highest level in nearly three weeks. In recent trade, the 10-year note was 17/32 lower in price, yielding 2.716%.
"That is taking some of the fear bid out the Treasury market."
Source: The Wall Street Journal
