With the debt ceiling raised, the Treasury will have to issue new bonds to refill its coffers.
The worst of the debt ceiling crisis is over now that lawmakers have passed a bill and sent it to President Joe Biden for signing, but investors are about to see an influx of Treasury securities enter the market. That's because even though Congress has agreed to raise the debt ceiling and trim rein in government spending for two years, the Treasury itself will still need to replenish its cash stores in its general account.
The worry among investors had been that if the Federal Reserve cuts rates, individuals in short-term bonds will face reinvestment risk – in which they're unable to find suitably attractive yields elsewhere once their holdings have matured. US6M US3M YTD line Yields on 6 month and 3 month Treasurys The 1-month T-bill yielded 5.25% on Friday, while the 6-month T-bill had a rate of 5.49%.
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