Citigroup Says it Doesn't Hold Treasuries Due on Oct 31

NEW YORK (TheStreet) --Citigroup said on Tuesday it no longer holds Treasury securities with a maturity date of October 31 or earlier, when a possible standoff on raising the federal debt ceiling risks plunging the United States government into a state of default.

The comments, made by Citigroup CFO John Gerspach on a Tuesday morning conference call with the media, indicate that large financial market dealers are continuing to prepare contingencies to insulate themselves from a short-term debt default by the U.S. Treasury.

Already, investment managers such as Fidelity and Reich & Tang have said they no longer hold Treasuries of a similar maturity. Citigroup, however, is among the biggest holders of Treasuries in the financial sector. It also is a primary dealer of new government debt issuance, including a worse-than-expected auction of one-month bills last week that caused the U.S. Treasury yield curve to invert through about mid-2015.

Gerspach did say that while the bank is managing its Treasury holdings to reflect the risks raised by an impasse in Washington, he still expects that the government won't default on its obligations.

On Tuesday, Citigroup reported a worse-than-expected third-quarter profit as declining revenue was only partially offset by improvements in credit quality and expense reduction.

The third-largest bank reported quarter net income of $3.2 billion, or $1 a share, compared to $4.2 billion or $1.34 a share in the second quarter and $468 million, or 15 cents a share, a year earlier.

Revenue came in at $17.9 billion, down 13% from the second quarter and 30% from the year-ago quarter.

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