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Investors are starting to brace for yet another debt-ceiling debacle.
The evidence of that is found in Treasury bills, an often-overlooked but highly sensitive market that reflects the premium investors want for lending to the US government.
The Treasury Department auctions bills that mature within a year to borrow from the public. Amid concern that the government will run out of funding mid-October, the yields on Treasury bills due that month are spiking.
Yields on bills due October 5 rose Thursday to 1.175%, the highest level since August 10, according to Bloomberg. Bills due the following week jumped to their highest level since they were issued in October 2016.
Yields on Treasury bills due October 12 have steadily increased in the last several months and have recently spiked.
treasury yieldsAndy Kiersz/Business Insider
And bills that mature in October, when the debt ceiling could be breached, have higher yields than those maturing earlier or later, as this chart shows.
8 24 17 treasury yields by maturity COTDBusiness Insider/Andy Kiersz, data from Bloomberg
By mid-October, Congress must vote on whether to raise America's borrowing limit and keep the government funded. Failure to do so would lead to a government shutdown. In 2013, the government shut down for 16 days after Congress disagreed on funding for the Affordable Care Act.
The issues this time are funding for the construction of a wall along the southern US border and Trump's public disagreements with key Republican leaders in Congress.
Democrats in Congress have rejected Trump's request for $1.6 billion to build the wall. At a rally in Phoenix on Tuesday, Trump indicated he was ready to shut down the government to fulfill the campaign promise. But the following day, House Speaker Paul Ryan said his colleagues did not think a shutdown was "necessary."
Trump's feud with Senate Majority Leader Mitch McConnell became public earlier this week after The New York Times reported that they hadn't spoken for weeks. Trump had blamed McConnell for the failure of the healthcare bill, while McConnell reportedly expressed doubt that Trump could salvage his presidency.
Trump then tweeted Thursday that he had asked McConnell and Ryan to tie the debt-ceiling legislation with a Department of Veterans Affairs bill the house approved on Tuesday. "They didn't do it so now we have a big deal with Dems holding them up (as usual)," he said.
This conflict could stifle efforts to pass other items on the Republican agenda including tax cuts.