4-Week Bills Price Below Nosebleed Levels, Still Yield Second Highest In Recent History

Following the battery of optimistic news from this morning that the debt deal is all but done, yields on short-term debt, soaring until about 9am, have tumbled as fears of an immediate default have been taken off the table. And moments ago today's most important auction, that indicating whether the "Money Market Vigilantes" have gone home, the auction of $20 billion 4-Week Bills took place. As a reminder, it was last week that yields on the same issue soared to a high of 0.35% - the most "distressed" yield since October 2009. Today, the fireworks were far more muted, however with a high rate of 0.24%, this was still a very elevated closing level, and still the second highest in years. So the question becomes: is this higher yield just a function of the lack of a definitive deal on the table, or has the broken Congress now assured that going forward so called "money equivalent" Treasury paper will have a step-wise higher clearing haircut, and if so, just how substantial is the structural damage to money markets, especially if all Congress does is kick the can forward by a few months?


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