Jun 1, 2023 - Economy

Treasury bill yields plunge with debt deal in view

Data: Tradeweb; Chart: Axios Visuals
Data: Tradeweb; Chart: Axios Visuals

This is what it looks like when the bond market exhales.

Driving the news: Yields plunged on U.S. Treasury securities set to mature immediately in the wake of the X-date, or June 5, when the government estimates it won't have enough cash on hand to pay its obligations.

  • For example: The yield on the T-bill due June 6 dove from a peak of nearly 7% a week ago, to about 5.4% on Wednesday, according to bond trading platform Tradeweb.

Be smart: Bond yields move in the opposite direction of prices, so this means that investor demand has pushed up the prices of these bills.

  • That undid some of the sharp tumble in prices experienced over the last few weeks, as investors avoided owning the government I.O.U.s potentially at the leading edge of a U.S. default if a deal to raise the debt ceiling wasn't reached.

The latest: The House of Representatives voted Wednesday to approve a deal struck between President Biden and House leader Kevin McCarthy; the Senate is expected to vote over the coming weekend.

The bottom line: The collapse in yields on select short-term Treasuries shows that as far as the bond market is concerned — and as we've pointed out previously, markets weren't really that concerned — the debt ceiling deal is pretty much done and dusted, and we can all move on in with our lives.

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