October 30, 2018 / 4:29 PM / 23 days ago

U.S. sells 1-month T-bills at lower interest rate

NEW YORK, Oct 30 (Reuters) - The U.S. Treasury Department on Tuesday sold $45 billion of one-month bills at an interest rate of 2.165 percent, which was lower than the 2.180 percent at the previous one-month bill sale a week earlier, Treasury data showed.

The interest rate on last week’s $40 billion one-month bill supply was the highest since Feb. 26, 2008.

“The auction generated a solid bid. Buyside demand was strong,” Tom Simons, senior money market economists at Jefferies LLC wrote in a research note.

He noted direct bidders which include overseas central banks bought about 13.5 percent of the latest one-month bill issue, which was their largest share since Feb. 6. This group of investors bought 9 percent of one-month supply a week ago.

“It looks like a large foreign investor might be investing their dollars short term ahead of new tariffs going into effect in January,” Simons wrote.

The Trump administration imposed a 10-percent duty on about $200 billion of Chinese products on Sept. 24. The tariffs will increase up to 25 percent by the end of 2018.

The Treasury also sold $25 billion of two-month bills at an interest rate of 2.205 percent, which was higher than the 2.180 percent at the prior two-month auction last week.

On Monday, it sold a combined $84 billion in three-month and six-month T-bills.

The government has been ramping up its debt sales this week to finance a growing budget deficit due to the massive tax cut enacted last December and a spending agreement reached in February.

Reporting by Richard Leong Editing by James Dalgleish

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