By Harry Robertson
LONDON, April 18 (Reuters) - The yield on the 2-month
U.S. Treasury bill jumped on Tuesday to its highest level since
at least 2018, according to Refinitiv data, as unease about the
U.S. debt ceiling and the likelihood of another interest rate
hike took hold.
The 2-month bill yield rose 15 basis points to as high as
5.08%, and was last trading at 5.01% .
The U.S. Treasury has said it could reach its mandated $31.4
trillion borrowing limit as early as June. The ceiling was back
in focus on Tuesday, so-called Tax Day, when individual tax
returns are due to be submitted, meaning the Treasury will soon
know the size of its take.
"This (rise in bill yields) is in part related to the debt
ceiling rising closer to the top of the list of worries, with
Republicans due to make a proposal to Democrats this week and
with today being a tax payment deadline," said Antoine Bouvet,
head of European rates strategy at Dutch bank ING.
The stand-off about raising the debt ceiling has increased
the chance of a debt default in the world's biggest economy.
U.S. credit default swaps - market-based gauges of the risk of a
default - earlier this month hit their highest level since 2012 .
"The debt ceiling issue is affecting most T-bills maturing
between late-June and September... and the effect is that rates
on T-bills maturing in this window will be elevated for this
reason," said Jussi Hiljanen, head of European rates strategy at
SEB.
Hiljanen said expectations that rates will rise again also
pushed up U.S. yields across maturities, noting it was difficult
to determine which factor was the bigger driver.
The yield on the 3-month T-bill last stood at
5.198%. That was just below the 5.308% reached on Friday, which
was the highest level since 2000, according to Refinitiv data.
Investors believe the Federal Reserve is approaching the end
of its rate-hiking cycle, and a last, quarter-point increase
could come in May. The Fed's interest rate target range
currently stands at 4.75% to 5% .
The 2-month T-bill yield shows what investors expect the
average interest rate to be over the next two months. Yields
move inversely to prices.
The U.S. 10-year Treasury yield hit 3.608% on
both Monday and Tuesday. That was the highest level since March
15, when bank wobbles unnerved investors.
(Reporting by Harry Robertson; additiional reporting by Dhara
Ranasinghe, Editing by Alexandra Hudson)
