Treasuries rose as 10-year note yields at almost the highest levels in eight weeks attracted buyers as Janet Yellen said the U.S. economy must improve before the Federal Reserve can begin slowing bond purchases.
Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
Rates on Treasury bills due in October soared and the U.S. attracted the least demand at weekly bill auctions since 2009 as Senate attempts to end the fiscal impasse were put on hold, increasing speculation of a default.
The Treasury’s $30 billion auction of three-year securities attracted higher-than-average demand from an investor class that includes foreign central banks at the first U.S. note auction since the government shutdown.
Investors should buy September Eurodollar futures contracts because the recent increase in the rate banks say they pay for three-month loans in dollars may have gone too far, according to JPMorgan Chase & Co.
Clients of the largest U.S. banks withdrew funds this month at the fastest weekly pace since the Sept. 11 attacks as a deposit-insurance program ended and customers tapped into their year-end cash hoards.
The market for borrowing and lending U.S. government debt, after shrinking 31 percent in the past five years, risks contracting further as global regulators consider raising capital and leverage standards for banks.