* U.S. sells record amount of 3-month, 6-month bills
* Treasury sells $50 bln cash management bills
* T-bill rates retreat on speculation over debt limit hike
By Richard Leong
NEW YORK, Feb 10 The U.S. government flooded the
U.S. bond market with over $100 billion in ultra short-term debt
on Monday as the month-end deadline on the federal debt ceiling
The U.S. Treasury sold a combined $134 billion in bills,
which some analysts reckoned is the biggest single-day supply of
U.S. T-bills ever.
This record supply of T-bills, together with worries the
government will be unable to increase its $16.7 trillion
borrowing limit by late February, pushed up what the government
paid investors and dealers to buy short-term debt.
Growing risk that Uncle Sam might delay its payments on its
debt obligation drove T-bill rates to their highest levels since
mid-October. Four months ago during the last debt ceiling fight
between President Barack Obama and top Republican lawmakers,
T-bill rates jumped to levels not seen since the global
The U.S. Treasury Department has repeatedly warned the
government will run out of cash to pay its debt obligations,
federal payrolls and retirement benefits by the end of February.
"The auctions went well all things considered," said Thomas
Simons, money market strategist at Jefferies & Co. in New York.
T-bill rates retreated from their earlier levels in
afternoon trading following the auctions, on news Republican
lawmakers will meet later on Monday to consider how to handle
the debt ceiling issue.
"There is a growing sense of optimism that this will be
handled more smoothly than last time," Simons said.
President Obama and Republicans struck a deal last October
to temporarily increase the debt ceiling. The Treasury now has
to use emergency measures to cobble up enough cash before
hitting the debt limit in a few weeks.
"Congress is likely to enact an increase in the debt limit
before the end of February. There is no appetite - particularly
among House Republicans - for a repeat of the high-stakes battle
over the debt limit that occurred last fall," Stone & McCarthy
Research Associates analyst Nancy Vanden Houten wrote in a
research note on Monday.
The Treasury Department on Monday said it would pay dealers
and investors 0.095 percent on $42 billion of its three-month
debt due on May 15.
It would pay 0.11 percent on $42 billion of six-month
T-bills that mature on Aug. 14.
The amount of three-month bills sold surpassed the prior
record of $35 billion, while the amount of six-month debt sold
eclipsed the previous high of $31 billion.
The Treasury also sold $50 billion in 72-day cash management
bills at an interest rate of 0.090 percent, slightly below what
traders had expected.
Treasury issues cash management bills to raise money for tax
refunds and other short-term purposes. This short-term debt has
irregular maturity dates.
On Tuesday, it will auction $8 billion in one-month bills
, marking the second consecutive week the
government will sell this amount of the T-bill maturity, which
is the smallest since April 2008.
The Treasury's juggling of its debt issuance has been part
of its attempt to ensure the government pays its bills on time
as it approaches its borrowing limit.
It is unclear whether Republicans will reach a consensus on
handling the debt ceiling. Back in October, disagreement among
GOP lawmakers roiled the T-bill sector, rippling across
financial markets in fears the U.S. might delay its debt
payments, resulting in a "technical" default.
Texas Republican Senator Ted Cruz, known for his tough stand
on fiscal matters, said on Monday it would be "irresponsible"
for Congress to grant President Barack Obama a debt limit
increase without also insisting on spending cuts.
On the open market, the interest rate on one-month T-bills
was last 0.070 percent, down nearly 3 basis points
from late on Friday after rising to slightly over 0.100 percent
The three-month T-bill rate fell to 0.065 percent
from 0.080 percent late on Friday, while the six-month bill rate
slipped to 0.073 percent from 0.083 percent on