May 9 (Reuters) – Yields on US short-dated T-bills jumped in early London trade on Tuesday, as investors sold off bonds that will mature around the time the US could hit its debt limit.
On Monday, Treasury Secretary Janet Yellen said that a failure by Congress to raise the USD 31.4 trillion federal debt limit would cause a huge hit to the US economy and weaken the dollar as the world’s reserve currency.
President Joe Biden and top Republicans and Democrats from Congress meet on Tuesday to attempt to break the impasse.
The 1-month Treasury bill yield rose 15 bps to 5.61%, while yields on the 2-month T-bill climbed 13 bps to 5.26%.
Yellen last week notified Congress that the Treasury could run short of cash to pay its bills by early June.
Analysts flagged that Yellen’s letter noted the actual date could be a “number of weeks” after this estimate, raising the odds of a short-term extension to July, or late September, or a scenario with no deal even later.
Congress has often paired debt-ceiling increases with other budget and spending measures.
(Reporting by Stefano Rebaudo, editing by Amanda Cooper)