The Treasury announced that it will resume auctioning one year bills on June 3. TheTreasury had consigned the year bill to the junk bin of financial history back in 2001 when forecasts had suggested that the govenrment securities market would disappear. I just spoke with a Treasury bill trader who tells me that the first auction will be for $15billion.
Spreads and rates in the short end of the Treasury market are expensive and this announcement has had little impact on rates or spreads. There is a solid reason for that. The Treasury refunding auctions will result in issuance of $21 billion of new securities ($15billion 10 year and $6 billion of a reopened bond). However, the Treasury has $53 billion of maturing debt as well as an interest payment of $22billion. That nets out to about $53billion seeking a home on May 15th when all of this comes to pass. That money is already in the front end and the expectation is that the preponderance will get reinvested in the front end.
Therefore, in the short run neither spreads not rates in the front end will move much as the reinvestment of the cash flow will overwhelm bill supply.