Treasury auction sees US join 0% club

The lowest bid permitted for a US bill auction is zero per cent but ahead of the sale, four week and three-month bills have been trading at negative yields in the secondary market. This reflects a sharp decline in Treasury bill issuance in recent months as the US political system faces another tussle over raising the country’s debt ceiling.

In trading on Tuesday, the four-week bill was quoted at minus 3 basis points and the three-month bill was at minus 1bp.

“Our current forecasts assume that the debt limit will be raised in the first week of November and that the Treasury will start to ramp up issuance aggressively the following week,” said Wrightson Icap, the research company. “We could see the four-week offerings return to $40bn within a couple of weeks after Congress acts. However, there is no guarantee that the end-game will play out that neatly.”