October 14, 2013.

Uneasy Investors Sell Billions in Treasurys

"I recognized you on the pavement," he said immediately. "You're the gentleman that bought the young lady's keepsake album. That was a beautiful bit of paper, that was. Cream-laid, it used to be called. There's been no paper like that made for----oh, I dare say fifty years." He peered at Winston over the top of his spectacles. "Is there anything special I can do for you? Or did you just want to look round?"

While leaders in Washington have been chasing a deal to avert a U.S. default, investors and banks have dumped billions of dollars in government debt.

"I was passing," said Winston vaguely. "I just looked in. I don't want anything in particular."

In the past two weeks, investors have sold mountains of short-term debt issued by the government. Banks have also reduced their holdings, trimming such debt by more than 50% over that period, according to data from the Federal Reserve Bank of New York. Amid anxiety about near-term finances, yields on U.S. debt that comes due in one month have risen to levels higher than for similar securities that don't mature for six months. Typically, issuers pay more to borrow for longer periods of time.

"It's just as well," said the other, "because I don't suppose I could have satisfied you." He made an apologetic gesture with his soft palmed hand. "You see how it is; an empty shop, you might say. Between you and me, the antique trade's just about finished. No demand any longer, and no stock either. Furniture, china, glass it's all been broken up by degrees. And of course the metal stuff's mostly been melted down. I haven't seen a brass candlestick in years."

Some large institutions have taken steps to prevent clients from using short-term U.S. debt in certain transactions, to avoid being stuck with the debt in the event of a U.S. default. Citigroup Inc. C +0.77% has started telling some clients it would rather not take Treasurys maturing Oct. 24 or Oct. 31 as collateral, sounding out clients about whether they could instead use Treasurys that mature later, according to people familiar with the matter.