Debt-Ceiling Fears Push Treasury Bill Yields to Record Highs

Yields on Treasury bills due in early June surged as investors avoided more at-risk bills, with rates on at least one instrument topping 7%. The bills maturing in that time frame are seen as most at risk of non-payment if the US government exhausts its borrowing capacity. The deadlock in debt-ceiling negotiations is adding to default concern around a number of soon-to-mature Treasury bills and also starting to dent investors' appetite for risk more broadly. The cost of insuring US sovereign debt against default with derivatives has also risen, signaling heightened risk, and attention is also beginning to turn to the major credit-rating agencies to see how they might react if the standoff goes down to the wire.