Dazed and Confused! 1m/3m T-Bill Curve Flirts With Zero Amid Debt-Ceiling Concerns

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by Anthony B Sanders
Between The Federal Reserve FINALLY normalizing interest rates and the constant friction in Congress over the Federal budget and debt ceiling, the Treasury market seems dazed and confused.
(Bloomberg) — The spread between 1- and 3-month Treasury bills touched -1.93bp as anxiety surrounding the debt-ceiling deadline increased; spread currently at ~0.873bp.
Treasury reiterated in its refunding statement it expects to be able to fund the government through the end of February,
Increases in coupon supply will “eat into available borrowing authority and will further limit bill issuance until the debt ceiling is raised,” Jefferies economist Thomas Simons says in note.
Yields on Treasury bills maturing March 1 rose by 1.1bp to 1.439%, whileMarch 8 securities were little changed at 1.369%; the rate on March 15maturities was little changed at 1.339%
Barclays strategists said in weekly note that yield on March 1 bill could rise to 1.50% or more as budget negotiations drag on
Will Congress expand the statutory debt limit yet again? Of course! Notice the speed at which the debt ceiling has been raised after the last two recessions.
Both Congress and The Federal Reserve suffer from a communiction breakdown.

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