Cash-strapped US Treasuries maturing in one day

The cash-strapped US Treasury awaiting a solution to the US debt ceiling impasse today auctioned off $15 billion worth of Treasury bills maturing in one day.

It was the first time in 16 years that the Treasury, which will issue the bonds on Monday, issued one-day maturities.

As Congress and President Biden haggled over the terms of legislation to raise the debt ceiling, the Treasury’s cash balance shrank to $37.5 billion, the lowest in at least six years.

Had there been no deal, the US government would have run out of cash to pay interest on its outstanding debt and meet other funding obligations. That scenario seems unlikely after the U.S. Senate approved legislation suspending the $31.4 billion cap until Jan. 1, 2025. It will cut spending on unspecified domestic programs and cap military spending increases at 3% in fiscal year 2024.

The Treasury takes so-called cash management measures like today’s when its balance is low. Last year it held 30 cash management auctions, but it has only issued one-day bills six times in the past quarter-century.

Yields on the one-day issue were 5.15%, lower than the 6.15% yield on $25 billion in three-day bills the Treasury issued on Thursday.

Short-term Treasuries are currently yielding more than longer-term bonds – historically seen as a signal of recession – with the 2-year US Treasury yielding almost 4.47% and the 10-year note yielding around 3 .66%.

Any investor can bid on a Treasury bill auction through Treasurydirect.gov, a broker, or a bank. Today’s auction likely attracted mostly large institutional investors looking to earn some extra short-term interest on substantial cash balances.