US auctions $179B of debt in a span of hours to rebuild cash
new york — The US Treasury on Tuesday 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.
The government began at 11:30am New York time by auctioning $51 billion of three-month bills at a yield of 1.64 per cent, 6 basis points more than similar-tenor debt sold on February 12, and $45 billion of six-month bills at 1.82 per cent.
Its $55 billion sale of four-week notes at 1pm had a yield of 1.38 per cent, with a gauge of demand known as the bid-to-cover ratio falling to 2.48, the lowest level since 2008. The first coupon offering of the week, a $28 billion auction of two-year notes, yielded 2.255 per cent, the highest in almost a decade.
All told, the offerings saw decent demand, given the market is facing a deluge of sales following the recent US debt ceiling suspension. The bid-to-cover ratios on the three- and six-month auctions were 2.74 and 3.11, respectively.
“There didn’t appear to be much of an impact on the three- and sixmonth bill auctions, but the fourweek ran into a little bit more of a digestion issue,” Thomas Simons, a money-market economist at Jefferies LLC, said in a note.
The $258 billion slate of US auctions set for this week is helping to push up the rates investors demand. Concerns about the US borrowing cap had forced the Treasury to trim the total amount of bills it had outstanding, but with the latest debt-ceiling drama over, the government is now busy ramping up issuance. 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 US 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. 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 fiveyear and seven-year auctions,” he said in an email. — Bloomberg