U.S. Pays Up to Auction $179 Billion of Debt in a Span of Hours

(Bloomberg) -- The U.S. 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 11:30 a.m. New York time by auctioning $51 billion of three-month bills at a yield of 1.64 percent, 6 basis points more than similar-tenor debt sold on Feb. 12, and $45 billion of six-month bills at 1.82 percent.

Its $55 billion sale of four-week notes at 1 p.m. had a yield of 1.38 percent, 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 percent, 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 U.S. 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 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 LLC, said in a note.

The $258 billion slate of U.S. auctions set for this week is helping to push up the rates investors demand. Concerns about the U.S. 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 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.

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.

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net.

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Brian Chappatta

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