US Treasury-bill yields turn positive

Yields on the fastest maturing US government debt rose above zero on Tuesday for the first time in three weeks as investors eased up on buying cash assets after meeting year-end targets. In Tuesday's auction, US one-month bills fetched a high rate of half a basis point, with a bid-to cover ratio of 4.08, down from 4.33 last week, the lowest in three weeks.
"The Street is largely set up for any cash needs going into year-end," said Christian Cooper, an associate strategist at RBC Capital Markets. "Also, the Street has been distracted by the out-sized moves over the last two days in the rest of the curve."
Following strong existing US home sales data on Tuesday, investors continued to sell longer-dated Treasuries, with the 30-year bond trading a full point lower from Monday's close. The front end of the yield curve remained anchored, however, with prices for one-, and three-month bills edging higher. The comfort with current cash positions extended beyond Wall Street. Benchmark euro interbank lending rates fell close to all-time lows on Tuesday as an abundance of liquidity ensured banks were well-funded, pointing to a smooth end to the year in money markets.
Eonia overnight rates fell to close to 0.33 percent at Monday's fixing, compared with 0.345 the previous session and their lowest since early November. Overnight deposits at the European Central Bank edged higher again to 138.4 billion euros. Two-week euro Libor rates which moved to cover the year-end period just under a week ago have risen to just over 0.40 percent from around 0.38 percent the day before they covered the turn of the year.
One-week euro Libor rates may post a similar gain on Wednesday as they too incorporate the end of December. Benchmark three-month euro Libor rates edged down to 0.66875 percent, close to recent record lows of 0.66750 percent. The three-month dollar London interbank offered rate was steady at its record low of 0.24875 percent, below the top of the Fed's current zero to 0.25 percent range for its funds rate which it broke through on Monday. Two-week dollar rates similarly show little stress heading into year-end at around 0.22 percent and equivalent sterling rates have been steady around 0.5 percent since mid-September.