OPER - Investors abandon 1-month Treasury yield spikes on debt ceiling deadline fears
2023-05-02 06:01:01 ET
The yields on the shortest end of the Treasury curve spiked sharply Tuesday on concern that the debt ceiling X date is less than a month away.
Treasury Secretary Janet Yellen said Monday the U.S. could run out of extraordinary measures to pay the government's bills as early as June 1, if the government's debt limit is not raised or suspended .
That sent cash flowing out of the 1-month Treasury bill ( US1M ), with the yield jumping 44 basis points to 4.81%. The 3-month yield ( US3M ), which had been the one traders had been avoiding on a later X date expectation, rose 20 basis points to 5.25%.
Due to the debt ceiling fight "there was a noticeable widening in CDS spreads for the United States, and investors moved into the 1m Treasury bill as they sought to avoid instruments that contained default risk like the 3m bill," Deutsche Bank said. "For instance, the 1m bill yield came down by -31.6bps (in April) to 4.09%, which was its biggest monthly decline since March 2020 as the Fed slashed rates back to the zero lower bound because of the Covid-19 pandemic."
President Joe Biden is expected to meet with Congressional leaders today and with House Speaker Kevin McCarthy, currently on a diplomatic trip, in a week.
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Investors abandon 1-month Treasury, yield spikes on debt ceiling deadline fears