If the recent increase in yields is sustained, Bloomberg estimates it's the equivalent of about 50 bps of Fed tightening.

After politicians cut a last-minute deal to keep the government open for two more months, Treasury yields climbed.

Instead of sliding into recession, the U.S. economy has powered ahead, even as growth stalls overseas. Investors are responding by shifting funds to the U.S. dollar.

The impending barrage of T-bills is a precursor to a glut of longer-term debt issues, which might result in a "demand vacuum" for longer-maturity bonds that pushes yields higher and tightens financial conditions.

Fitch Ratings warns the nation's AAA rating is under threat from the political standoff over the debt limit; DBRS Morningstar places the U.S. AAA rating under review "with negative implications"; and the cost of insuring U.S. sovereign debt with derivatives has risen.

"Until either the Fed turns dovish or global growth expectations bottom, the dollar will remain king."