Yield inversion at the short-term side of Treasuries.

Picking up from yesterday's post regarding rising short-term Treasury yields combined with dropping long-term ones, yesterday's opening of bids for 4-week T-Bills by the Treasury resulted in a jump of their yields...and all others except 20- and 30-year Bonds.  This change, albeit small, signals an ever so slight distrust in US.  What seems interesting to me however, is that the 4-week T-billl  is now significantly higher than the 2-year Bond.  This short-term inversion appears to be a significant signal that markets now expect the US to hit the default button on Oct. 17, and not have this whole economic mess resolved anytime soon.

Now, this is no Greece for two reasons:

1. Greece defaulted because it couldn't afford to pay its bills as borrowing rates soared across the board to unbelievable heights.  Meanwhile, the US is still at historic lows for borrowing rates, even in the face of a threat of the debt ceiling.
2. If the US defaults, it was a selective default because Republicans artificially presumed the need for slashed spending in the face of low borrowing rates.  The day after Republicans stop being stupid and agree to raise the ceiling and quit using the economy as a bargaining chip, is the day both the markets and the US government resumes normal operations.

We're a long ways away from having the sort of yield inversion that Greece exhibited.  Still, it's worth paying attention that the markets are now expecting Republicans to hold their ground and keep the debt ceiling in place.