Jefferies economist Thomas Simons.....>

US TSYS/BILLS: Jefferies economist Thomas Simons said today's "3-month bill

auction tailed 3 bps as it stopped at 1.445%. According to our records, this is

the widest tail for a 3-month auction since November 24th, 2008."

- He added the 2.71 bid cover "is the weakest since January 26th, 2009."

- "So why was this auction so bad? The simple answer is the debt ceiling," he

said. "Investors are starting to avoid mid- to late-March maturities for fear

that they are close to the "drop-dead date" when Treasury will run out of cash

and potentially default on its obligations. In past debt ceiling episodes,

certain dates have been avoided well in advance of the cash squeeze because

investors do not want to be left holding the bag should liquidity dry up."

- He added 3-month bill auction indirect bidders "took down 20.1% vs 19.7% a

week ago, and well below average. Directs took down 5.9%, also on the soft side.

Dealers took down 74% which is well above average due to the lack of buyside

interest."