October 19, 2015 / 4:45 PM / 4 years ago

MONEY MARKETS-U.S. T-bill rates jump on debt ceiling worries

(Adds 3-month, 6-month T-bill auction results)

By Richard Leong

NEW YORK, Oct 19 (Reuters) - Interest rates on U.S. Treasury bills due in November jumped on Monday on worries the absence of a deal to raise the federal borrowing limit will result in the government delaying payments on its debt obligations.

About $235 billion of Treasury bill issues are scheduled to mature next month.

Jitters about delayed repayments to T-bill holders in less than a month distorted the interest rates in this sector.

Last week, Treasury Secretary Jack Lew urged federal lawmakers to increase the statutory borrowing cap, currently at $18.1 trillion as the government will be unlikely to issue new debt after Nov. 3.

“It’s all related to the debt ceiling,” Tom Simons, money market strategist at Jefferies & Co. in New York said of the jump in November T-bill rates.

Analysts projected the Treasury will run out of cash by mid-November.

On the open market, the interest rate on the T-bill issue due Nov. 12 was last quoted at 0.0775 to 0.0850 percent , up 5 basis points from late on Friday, according to Tradeweb.

It was bid earlier as high as 0.175 percent, which was the highest on ultra short-dated government debt issues in two years, during the prior debt ceiling debate.

The Treasury had shrunk its T-bill issuance in anticipation the government would exhaust its borrowing capacity in the coming days.

On Tuesday, the Treasury will sell $5 billion in one-month bills for a second straight week, which was the smallest size for this T-bill maturity since 2001 when it adopted a single-price auction format for one-month bills.

Three-month rates are now lower than one-month rates, while interest rates on T-bills before Nov. 3 remained in negative territory.

On Monday, the Treasury sold $26 billion of three-month bills at an interest rate 0.015 percent, compared with zero percent at the prior two auctions.

It also auctioned $26 billion of six-month bills at an interest rate of 0.110 percent, the highest in four weeks.

Reporting by Richard Leong; Editing by Chris Reese

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