* U.S. 1-month T-bill rates highest since November
* Treasuries CDS prices nearing 2011 debt fight levels
* U.S. jobless claims little changed in latest week
By Richard Leong
NEW YORK, Oct 3 U.S. Treasuries prices slipped
on Thursday as investors moved to the sidelines, awaiting a
breakthrough in Washington to end the first government shutdown
in 17 years.
The bond market brushed off encouraging news at home and
abroad, suggesting the global economy is rolling along, albeit
at a sluggish pace.
"People are just keeping their cards close to the vests as
they keep an eye on what's going on with the politicians in
Washington," said Larry Milstein, head of agency and government
trading at R.W. Pressprich & Co. in New York.
Given the gridlock over the budget and healthcare reform
that led to a partial government shutdown that began on Tuesday,
investors are increasingly worried the lawmakers will not agree
on a deal to increase the statutory $16.7 trillion borrowing
limit by the Oct. 17 deadline.
Failure to increase the debt ceiling, they fear, would
unleash market chaos and damage the long-term creditworthiness
of the U.S. government and the safehaven status of the dollar.
"The debt ceiling is a much greater concern," Milstein said.
As concerns over a U.S. default have intensified, the cost
to insure Treasuries has soared in the credit default swaps
Investors would pay about 46,000 euros to insure 10 million
euros worth of Treasuries for a year on Thursday, according to
Markit. This was the highest premium on one-year U.S. sovereign
debt since July 2011 during the first debt ceiling showdown
between President Barack Obama and top Republican lawmakers.
Interest rates on Treasury bills that will come due between
the debt ceiling deadline and the end of October also rose on
default worries. The rate on the T-bill issue due Oct. 31
touched 0.17 percent, the highest level since
November. This compared with the 0.03 percent on the T-bill due
the following week.
A stabilization in Wall Street stock prices, in the
meantime, curbed bids for longer-dated bonds.
Benchmark 10-year Treasury notes were down 3/32
in price with a yield 2.63 percent, up 1 basis point from late
on Wednesday but still close to a seven-week low.
Economic data took a backseat to worries about the political
fighting in Washington.
The U.S. Labor Department said jobless claims totaled
308,000 in the week ended Sept. 28, compared with an upwardly
revised 307,000 in the previous week. Economists had projected
the latest figure to have risen to 313,000.
This was the last government economic report until the
partial shutdown ends.
While the standoff has forced up to a million federal
workers into furlough and reduced non-essential services, some
branches of government, including the Federal Reserve, have
The Fed plans later to buy $1.25 billion to $1.75 billion in
Treasuries that mature between February 2036 and August 2043,
part of its intended $45 billion in overall government debt
purchases in October.
Also, San Francisco Fed President John Williams, Atlanta Fed
President Dennis Lockhart, Dallas Fed President Richard Fisher
and Fed Governor Jerome Powell will make public appearances