August 6, 2018 / 5:06 PM / in 2 months

UPDATE 1-Demand for U.S. T-bill supply sags on heavy issuance

* U.S. to sell record amount of 1-month T-bill supply

* Bid-to-covers at Monday’s bill sales lowest in at least 2009

* U.S. to introduce 2-month bill issue in October (Adds background, graphic, quote)

By Richard Leong

NEW YORK, Aug 6 (Reuters) - Demand for U.S. Treasury bill supply on Monday weakened on Monday, prompted by a flood of short-term issuance from the government to raise cash for spending and meeting its debt obligation.

Earlier Monday, the U.S. Treasury Department said it would sell $70 billion in 1-month bills on Tuesday, the most ever for this debt maturity at an auction.

The Treasury last week said it would introduce a 2-month bill issue in October.

This week’s T-bill sales, worth $166 billion, are expected to raise $41 billion in new cash for the government, analysts said.

“Despite holding a lot of cash, Treasury has been raising more cash with the bill auctions in order to pre-fund the Refunding,” Jefferies LLC’s chief financial economist Ward McCarthy wrote in a research note.

McCarthy was referring to this week’s quarterly refunding where the government will repay $38.2 billion to investors on maturing debt they own.

On Thursday, the Treasury said it had $344.5 billion in cash.

At Monday’s bill sales, the ratio of bids to the $51 billion of 3-month bills offered was 2.54, the lowest since December 2008, Treasury data showed.

The Treasury sold the latest 3-month issue at an interest rate of 2.010 percent, up from 2.000 percent at the 3-month auction a week ago.

The bid-to-cover ratio on $45 billion of 6-month T-bills was 2.66, which was the weakest reading since February 2009.

The Treasury paid an interest rate of 2.180 on the latest 6-month bill supply, up from 2.160 percent at last week’s 6-month auction.

Reporting by Richard Leong; Editing by Meredith Mazzilli and Jonathan Oatis

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