The government bond market staged a strong rebound Monday after the Treasury Department disclosed emergency measures to avoid defaulting on more than $100 billion in debt coming due this week.
The price of the Treasury’s main 30-year bond, down nearly 1/2 point in early trading, closed up 3/4 point, or $7.50 per $1,000 in face value. Its yield, which moves in the opposite direction, dropped to 6.27 percent from 6.33 percent late Friday.
In effect, the Treasury Department plans book-juggling maneuvers on the public debt that will allow it to sell $137 billion in new securities during the next nine days, more than enough to pay off $102 billion in principal and interest due this week.
The first of the auctions came Monday, with the Treasury Department raising $29.4 billion by selling three- and six-month bills.
The department sold $14.6 billion in three-month bills at an average discount rate of 5.43 percent, up from 5.36 percent last week. Another $14.8 billion was sold in six-month bills at an average discount rate of 5.33 percent, up from 5.29 percent.
The new discount rates understate the actual return to investors–5.60 percent for three-month bills and 5.57 percent for six-month bills.
The balance of the $137 billion in borrowing will come from short-term cash management bills Tuesday, 52-week bills Wednesday and three-year and 10-year notes next week.
