The "Kinks" Return As Treasury Bills Reprice Debt Ceiling Debacle

Tyler Durden's picture

Just when funds thought it was safe to buy short-term Treasuries and rehypothecate them to immeasurable leverage, yields on Bills due after the February 7th debt-ceiling suspension ends are lifting significantly in recent days. Since the year-end liquidity squeeze, yields on the March bills have developed a hump indicating concerns beginning. Of course, levels remain very low for now but the 'kink' is notable.

 

 

Congress suspended the $16.7 trillion debt ceiling on Oct. 16 – a day before officials estimated the government would have exhausted its emergency borrowing authority. The suspension will last through Feb. 7, 2014. On Feb. 8, the debt limit will be reinstated reflecting the debt issued between Oct. 17 and Feb. 7, increasing the ceiling to roughly $17.3 trillion by then.

If lawmakers don’t act on the debt limit before Feb. 8, then the Treasury will employ “extraordinary measures” to keep the government afloat for a bit longer.