Money markets us nov t bill rates fall on tentative us debt deal

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(Updates market action, adds quote, byline)By Richard LeongNEW YORK Oct 27 Interest rates on U.S. Treasury bills due in November slipped into negative territory on Tuesday as investor demand returned in the wake of a tentative deal on a two-year U.S. budget deal and an extension of the federal debt ceiling. Interest rates on T-bills due in 2016, however, rose on the day in anticipation the Treasury Department will ramp up supplies to compensate for the reduction it had embarked on since September, analysts said. Analysts estimated the Treasury could sell $100 billion to $150 billion in additional T-bills in the coming weeks to replenish its coffer, if the deal is approved. Moreover, some investors likely reduced their T-bill holdings to hedge against the possibility the Federal Reserve might signal it may still raise interest rates by year-end.

Fed policy-makers are scheduled to issue their latest policy statement at 2 p.m. EDT (1800 GMT) on Wednesday. Investors had worried repayments of T-bills that mature in the coming weeks would be delayed if the government borrowing capacity was not increased.

T-bill rates into year-end slipped into negative territory in early Tuesday trading before December rates returned above zero, according to Tradeweb."The bills maturing around the debt limit dates were considered cheap. With the reports of a possible debt ceiling extension, rates got back in line with the nearby maturities," said Alex Roever, head of U.S. interest rate strategy at J. P. Morgan Securities in New York. Traders hope Congress will approve the increase in the borrowing limit before Nov. 3, the date after which Treasury Secretary Jack Lew said the government would no longer issue more debt.

Analysts forecast the Treasury would run out of cash in mid-November without an increase of its legal $18.1 trillion debt limit. Interest rates on T-bills due Nov. 5 were last quoted at 0.0150 to 0.0250 percent, down 3 basis points from late on Monday. They fell as low as -0.005 to 0.005 percent. Those due Nov. 12 were last quoted at 0.0100 to 0.0200 percent, down nearly 4 basis points on the day, according to Tradeweb. T-bill rates in December were up 0.5 to 1.5 basis points from late on Monday.