U.S. Treasury Bill Interest Rates Skyrocketing
October 9th, 2013Via: Washington Post:
Normally, the interest rate the government pays on bills is around the same as the short-term interest rates in other money markets (for example, the interest rates banks charge each other for overnight cash, or the interest rate that the Federal Reserve targets). Both of those are near zero right now, which is why on Sept. 30, eight days ago, the interest rate on Treasury bills maturing Oct. 17 was a mere 0.03 percent. Nothing, in other words.
But since then, the possibility that the Treasury might have trouble paying or might not be able to pay its bills over the next few weeks has grown — and the interest rate has skyrocketed. It was at 0.16 percent at Monday’s close. On Tuesday the rate so far has been almost double that, as high as 0.297 percent.
There are reports, including this one from Reuters, indicating that some of the biggest money managers in the world are starting to avoid U.S. government debt that matures in the near future out of fear they will not be repaid promptly. Bond investors seem to be confident that the U.S. government will make good on its obligations in the longer term –securities that mature a year or more from now are actually seeing their rates fall. But they are becoming less confident that these short-term securities will pay on time.
