Treasury to boost sales of T-bills

The U.S. Treasury said Thursday that it would sell the most three-month bills since at least 1990 and the largest amount of six-month bills in more than a year amid an increase in investor demand for the safest securities.

The Treasury will auction $24 billion in three-month and $19 billion in six-month bills Monday. It will be the biggest three-month sale since at least July 1990, when Bloomberg began compiling the data, and the largest six-month auction since March 2006. By contrast, the government sold $21 billion in three-month and $17 billion in six-month bills this week.

Demand for T-bills has risen as credit markets have been roiled in recent weeks. Even high-quality corporate borrowers have had trouble finding buyers for their short-term IOUs, such as commercial paper, as investors have turned risk-averse.

“There’s been heavy buying in the bill market as people shun certain issuers in the commercial paper market,” said John Hendricks, a senior trader of government debt at Hartford Investment Management Co. Investors’ shift is an “ongoing process of trying to improve liquidity” in portfolios, he said.

Larger auctions could help satisfy demand by money market mutual funds that primarily own government IOUs. Safety-seeking investors poured $75 billion into those funds in the seven days ended Tuesday, according to fund tracker IMoneyNet Inc.

Treasury bill yields had plunged to two-year lows Monday as buyers bid aggressively for the securities.

Yields rose Thursday as demand waned somewhat. The yield on three-month T-bills ended at 3.9%, up from 3.66% on Wednesday. Six-month T-bill yields rose to 4.17% from 4.05%.

T-bill yields still are far below their levels of just two weeks ago. The three-month T-bill was at 4.94% on Aug. 8; the six-month T-bill was at 5% that day.