Cash-Strapped U.S. Treasury Auctioned Bills Maturing in One Day

The cash-strapped U.S. Treasury, awaiting a resolution to the U.S. debt ceiling impasse, today auctioned $15 billion in T-bills maturing in one day.

It marked the first time in 16 years the Treasury, which will issue the bills Monday, issued one-day maturities.

As Congress and President Biden have haggled over terms on legislation to raise the debt ceiling, Treasury’s cash balance has dwindled to $37.5 billion, the lowest in at least six years.

Had there been no agreement, the U.S. government would’ve run out of cash to pay interest on its outstanding debt and meet other financing obligations. That scenario appears unlikely after the U.S. Senate approved legislation suspending the $31.4 billion ceiling until Jan. 1, 2025. It will cut spending for unspecified domestic programs and cap military spending increases at 3% in fiscal 2024.

The Treasury takes so-called cash management measures such as today’s when its balance runs low. Last year, it had 30 cash management auctions, but it only has issued one-day bills six times in the past quarter-century.

Yields on the one-day issuance equaled 5.15%, lower than the 6.15% yield on $25 billion worth of three-day bills the Treasury issued Thursday.

Short-term bills currently yield more than longer-term bonds—historically considered a recessionary signal—with the U.S. 2-year Treasury note yielding close to 4.47% and the 10-year note yielding about 3.66%.

Any investor can bid in a T-Bill auction via Treasurydirect.gov, a broker or a bank. Today’s auction likely attracted mostly large institutional investors looking to earn a little extra short-term interest on substantial cash balances.