How Dispute Affected Investors

The government’s debt ceiling problem caused concern among owners of Treasury bills and other government securities, but investors had nothing to fear.

The Los Angeles branch of the Federal Reserve Bank of San Francisco received double the normal number of telephone calls after Congress’ failure to pass legislation to raise the federal debt limit, said Ted Schroeder, assistant vice president in charge of marketable securities, savings bonds and Treasury accounts. Congress finally raised the government’s borrowing authority late Tuesday.

During that period, the Treasury had suspended sales of savings bonds, Treasury bills and other securities, leaving some investors worried if they could redeem securities they already held. But all securities were redeemed as normal, and interest rates and payments were not affected, Schroeder said.

However, the sales suspension did affect Treasury bills that were maturing and were due to be automatically reinvested by the government. Federal Reserve banks held the funds for these maturing securities and were not paying interest for the few days the money sat idle, Schroeder said. But investors could request their money and reinvest it themselves somewhere else, he said.