* One-month T-bills sold at lowest interest rate since June
* One-year bills auctioned at lowest rate since February
* Possible end of a bank insurance program feeds T-bill bids
By Richard Leong
NEW YORK, Dec 11 Interest rates on new U.S.
Treasury bills fell on Tuesday on keen demand for the low-risk
securities in a typical year-end move among fund managers.
Money market mutual funds were among the investors vying for
T-bills in recent weeks. Money funds have seen a jump in assets,
partly on corporate treasurers and cash managers shifting money
away from bank accounts whose unlimited government guarantee
might not be renewed by year-end, analysts said.
"There was a pretty good bid from the buyside. That's pretty
typical at year-end," said Thomas Simons, money market economist
at Jefferies & Co in New York.
The U.S. Treasury Department sold $40 billion in four-week
or one-month bills at an interest rate of 0.05 percent, matching
the lowest level set on June 19.
Just two weeks earlier, the Treasury auctioned one-month
bills at an interest rate of 0.175 percent, matching the highest
level in two years.
A year ago, it sold one-month T-bills at zero percent
The ratio of total bids to the amount offered on the bill
issue due Jan. 10, 2013 was 4.64, the highest in five weeks.
At the same time, the Treasury sold $25 billion in one-year
bills at an interest rate of 0.160 percent, the lowest since
The bid-to-cover ratio on one-year bills was
stronger-than-average at 4.96, but it was below the 5.08 at the
auction held a month earlier.
POSSIBLE END TO A BANK PROGRAM
Some large investors have been socking more cash into money
market funds and Treasury bills in anticipation that a federal
guarantee program on large business checking accounts will not
be renewed by year-end.
On Dec. 31, the Federal Deposit Insurance Corp is set to
terminate its "Transaction Account Guarantee," or TAG. It
insures bank deposits of more than $250,000, the amount the FDIC
normally covers, in checking accounts that do not pay interest.
TAG was created in September 2008 during the height of the
global financial crisis. It was intended to help stabilize the
banking system as the collapse of Lehman Brothers roiled
financial markets. TAG was meant to reassure depositors that
their money was safe and to ensure that businesses and local
governments had access to cash.
Under TAG, money kept in large business accounts grew to
$1.49 trillion at the end of the third quarter, according to the
most recent FDIC data.
The Senate is scheduled to vote later Tuesday on extending
TAG, but it is unclear whether it will pass. Even if it clears
the Senate, an extension is expected to face a tough fight in
the House of Representatives, analysts say.