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Yield on 3-Month Treasury Bill Shoots Up NewsMax.com Wires NEW YORK -- The yield on the 3-month Treasury bill shot up Tuesday, erasing some of the last few days' hefty losses, as some investors stepped away from the ultra-safe assets. At 5 p.m. EDT, the yield on the 3-month Treasury bills was 3.59 percent, up from 3.01 late Monday. The discount rate rose 0.56 percentage point to 3.50 percent. The yield on the T-bill was as low as 2.92 percent early Tuesday, but jumped close to 0.70 percentage point by late afternoon following a weak auction of four-week bills. The turnaround in bills Tuesday also came after the Federal Reserve announced earlier in the day that it was lowering the fee it charges as part of lending securities from its holdings. The 10-year Treasury note was up $3.13 per $1,000 in face value, or 10/32 point, from its level at 5 p.m. Monday. Its yield, which moves in the opposite direction, fell to 4.59 percent from 4.63 percent. The 30-year bond rose 13/32 point. Its yield fell to 4.95 percent from 4.97 percent. The 2-year note rose 3/32 point. Its yield fell to 4.03 percent from 4.09 percent. Earlier in the day, the yield dipped to 3.95 percent. Story Continues Below
The 3-month bill's move higher in yield Tuesday follows the last few days' sharp drops, with nervous market participants becoming increasingly risk averse. T-bills are the securities that come closest to cash. Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York, said that "rising T-bill rates will be seen as a positive development in the current environment because plunging bill rates have been seen as a sign of the psychotic atmosphere that has gripped the markets." Federal Reserve Chairman Ben Bernanke met with Treasury Secretary Henry Paulson and Senate Banking Committee Chairman Christopher Dodd, D-Conn. Dodd said Bernanke promised to use "all the tools available" to respond to market volatility. Also Tuesday, the New York Fed said that it was lowering the fee it charges as part of lending securities - a move market participants say was aimed at improving market liquidity. The New York Fed cut the rate to 0.5 percent from 1 percent. While investors were surely heartened by developments, strategists said they're expecting Treasurys to continue to be boosted as heightened risk aversion remains. Tom di Galoma, managing director and head of Treasurys at Jefferies & Co. in New York, said that even with Treasury prices seesawing, there will still be an underlying flight-to-quality bid for government bonds. "There's going to be continued disruptions in the money markets especially," di Galoma said. Indeed, the asset-backed commercial paper market continued to struggle Tuesday, with investors wary of holding onto the paper backed by home loans, other consumer debt and other types of assets. "Apparently, the market's worse today than it's ever been," said Dominic Konstam, head of interest rate strategy at Credit Suisse. The 30-day benchmark index yield on asset-backed commercial paper quoted by broker-dealers has reached 6.05 percent, up from 5.30 percent a couple of weeks ago, he said. That move came after Britain's largest lender, HBOS PLC, said its credit-investment vehicle, Grampian, will repay maturing asset-backed commercial paper from the bank's balance sheet rather than tap the credit markets. On the horizon, Di Galoma pointed to a huge rollover, close to $500 billion in commercial paper, that will need to find a way to get funded. "There's a very limited bid" for that paper, he said. "But it will start to find some homes if it looks like the Fed is going to reduce the funds rate."
© 2007 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed. Editor's note:
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