Treasury bill yields surge as U.S. debt worries grow

NEW YORK Wed Oct 16, 2013 9:32am EDT

NEW YORK Oct 16 (Reuters) - Yields on U.S. Treasury securities due this month surged on Wednesday and the cost of borrowing against Treasuries in the repurchase agreement market rose as investors fretted about gridlock in Washington over raising the government debt ceiling.

Lawmakers in the U.S. Senate were said to be close to agreeing on a proposal to raise the debt limit on Wednesday, though with no deal yet agreed to, investors continued to be wary of debt at risk of delayed payments.

Interest rates on T-bills due Oct. 24 jumped dramatically to trade at 0.72 percent, up from 0.51 percent late on Tuesday. They have surged from 0.03 percent at the beginning of the month.

The cost to borrow overnight with loans backed by Treasuries also jumped to around 0.35 percent. These had traded at around 0.10 percent before fears over the debt ceiling came to the fore.

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