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Yields of short-term Treasuries rise to highest levels since ‘08

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The U.S. Treasury has sold $179 billion of securities as it works to rebuild its cash balance, with yields at its auctions of three- and six-month debt rising to levels unseen since 2008. As trading opened Thursday, the Dow jumped 200 points as the 10-year yield eased from a four-year high.

The government began on Tuesday by auctioning $51 billion of three-month bills at a yield of 1.64%, 6 basis points more than similar-tenor debt sold on Feb. 12, and $45 billion of six-month bills at 1.82%.

All told, the offerings saw decent demand, given the market is facing a deluge of sales following the recent U.S. debt ceiling suspension.

“There didn’t appear to be much of an impact on the three- and six-month bill auctions, but the four-week ran into a little bit more of a digestion issue,” Thomas Simons, a money-market economist at Jefferies, said in a note.

Financing estimates from January show that the Treasury expects to issue $441 billion in net marketable debt in the current quarter, with the bulk of that in the short-term market.

This is just the beginning of the U.S. debt auction schedule. The Treasury will sell five- and seven-year maturities in the next two days, with both offerings larger than last month. It will also issue $15 billion of two-year floating-rate notes.

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February 21

Tom di Galoma, managing director of government trading and strategy at Seaport Global Holdings, said just before the two-year auction that it should be met with decent demand.

However, “I worry more about the five-year and seven-year auctions,” he said in an email.

Bloomberg News