Fear premium in T-bills evaporating

NEW YORK: The fear premium baked into Treasury bills once seen as most at risk of a US default due to the debt-ceiling crisis has ebbed now that the Senate has passed legislation to suspend the borrowing limit.

Yields on Treasury bills maturing in early June – when Treasury secretary Janet Yellen had said her department was at risk of running out of cash in the absence of a debt-cap deal – tumbled further last Friday, with rates on some issues dropping below 5%. That’s well below levels of 7% or more that some had reached at the height of the crisis last month. Meanwhile, the cost of insuring US sovereign debt against default via derivatives has also eased back.