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"Probably Nothing..."

Yesterday we warned of the growing anxiety in short-term Treasury-Bill markets over the looming debt-ceiling. Today, the tension has worsened with the 10/19 bill now up a shocking 13bps in 3 days leaving the curve extremely inverted around the potential debt-ceiling deadline.

As Bloomberg notes, short-term investors aren’t waiting for Treasury Secretary Steven Mnuchin to inform Congress of the exact date the U.S. will run out of cash.

Traders are already willing to pay more for bills maturing after Oct. 19 to avoid being caught holding securities vulnerable to a technical default -- in line with Congressional Budget Office forecasts that predict the federal government will hit the debt ceiling around early- to mid-October.

Because of the anxiety surrounding the debt limit, bills maturing Oct. 19 are yielding 1.15 percent, versus 1.09 percent for securities due two weeks before or after.