MONEY MARKETS-Treasury bills to stay rangebound

by on September 27, 2012 8:50 pm BST

NEW YORK, Sept 27 |
Thu Sep 27, 2012 4:50pm EDT

(Reuters) – Yields on Treasury bills will
likely stay rangebound for the foreseeable future as markets
shift their focus to longer-dated U.S. debt.

Unless the Federal Reserve moves on interest in excess
reserves, the government nears default as with last year’s
bruising debt ceiling talks or monetary policy expectations
shift globally, bills will probably not budge much, said Ian
Lyngen, senior government bond strategist at CRT Capital Group
in Stamford, Connecticut.

“The short answer is I don’t expect any of those things,” he
said. Bills “continue their rangebound trend as the bulk of the
Treasury market’s focus has been pushed out the curve.”

The idea of lowering the rate that the U.S. central bank
pays banks for parking their reserves received some attention
this summer as a way to encourage banks to lend more to
businesses and individuals, boosting the economy.

But the idea of cutting the interest on excess reserves has
since faded.

In addition, last year’s fight over raising the government’s
borrowing ceiling eventually brought the U.S. government to the
brink of a debt default and cost the United States its top-tier,
triple-A credit rating from Standard and Poor’s.

U.S. Treasury Secretary Timothy Geithner has already warned
Republicans against a repeat of last summer’s theatrics.

Monetary policymakers around the world are expected to keep
up an accommodative stance as global growth worries persist.

Yields on three-month bills traded at 0.091
percent on Thursday. Yields on six-month bills traded
at 0.131 percent.

In other short-term lending, the amount of seasonally
adjusted U.S. commercial paper contracted for a fourth
consecutive week in the week ended Sept. 26, Federal Reserve
data showed on Thursday.

Non-seasonally adjusted commercial paper outstanding – which
some analysts consider a more reliable reading than the
seasonally adjusted one since it has been distorted by the
financial crisis – declined as well.

In unsecured lending, the London interbank offered rate, or
Libor, on three-month dollars slid to 0.36025
percent, its lowest in about a year, from 0.36225 percent on

The rate has sunk almost steadily for about three months,
and is well off the 0.58100 percent at the end of last year.

Britain is expected to propose on Friday that Libor, the
interest rate at the center of a rigging scandal, be anchored to
real transactions and that an industry body be stripped of its
supervisory role, to restore trust in the benchmark.