10-year Treasury climbs to 2.91% on less than enthusiastic bills auction

Not a good way to begin if you have to sell $441 billion in net debt in the first quarter of 2018.

This morning the U.S. Treasury sold $96 billion of short-term bills at yields unseen since 2008. At auction the government sold $51 billion of three-month bills at a yield of 1.64%, 6 basis points higher than the yield on similar notes sold on February 12. The ratio of bids to volume on offer fell to 2.74, the lowest level for that ratio, used to judge market demand at a Treasury auction, since December 26. TheTreasury also sold $45 billion of six-month bills at 1.82%. That compares to a yield of 1.785% at the auction eight days ago.

The Treasury will sell an addition $55 billion in short-term debt later today.

The huge flood of short-term debt is part of the Treasury’s effort to rebuild its cash balance following the crisis over the U.S. debt ceiling. (That ceiling was suspended for two years earlier this month.) The Treasury estimated in January that it expects to issue $441 billion in net marketable debt in the first quarter of 2018. Most of that will be in the short-term market.

As of noon New York time the yield on the 10-year Treasury was up 3 basis points to 2.91%. (100 basis points equals one percentage point.)