Can someone explain this to me in lay men's terms?
Practically, banks, insurance funds, pension funds, and other risk-averse holders are dumping Treasuries due between 17 October and 1 November. Many of these institutions are highly leveraged and count on the certainty of cash from Treasury payments to fund other activity - a delay in payments from the Treasury, long considered "risk-free", could lead to them defaulting on other payments, leading to a daisy-chain collapse of credit similar to what we saw following the collapse of Lehman Brothers. By selling the riskiest securities, those due between 17 October and 1 November, these institutions can help defray the risk of being caught on the wrong end of an empty till.
This is the interest on the bond, and the Fed sells these Treasurys to the public in order to raise money on an interim basis.
Effectively, it reflects the cost of borrowing money by the Federal Government of the United States to borrow money for ONE MONTH. This is a very short time period, as Treasurys are for sale in 1-mo to 30-year periods. So you'd only charge a high interest rate if you think the likelyhood of non-payment is actually an issue (that's risk vs. return).
Typically, 1 month is very not-risky, as it's highly likely that the US Gov is still around and solvent in a month. But with the recent debt ceiling / government shutdown rhetoric the market is beginning to get a little worried, so the premium the government must pay in order to borrow money has increased.
Basically by the Congress/White-House being deadlocked and having such fiery rhetoric it begins to appears as if there is a chance of default, and that chance is slightly higher than normal, so the risk/return on the 1 mo treasury has increased, as reflected in the increased interest rate the government has to pay to its bond holders.
The Trillion Dollar Bet is also a good, high-level documentary.
Imagine we enter an agreement - you'll lend me $100 for a year, and I'll pay you $10 after a year. The banks will pay you $5 to borrow your $100, so you think this is a good deal.
After a year, I pay you back the $100, but I don't have my $10 for interest. I'll pay you back as soon as I can, I swear, seeing myself to the exit. Five years later, true to my word, I give you the $10. So you get your money eventually - is this a good deal?
Well, no, of course not. It may be better than the bank still, but it's not as good as the deal initially made it appear. You could have taken my $10, given it to a bank for the next five years and - assuming you didn't reinvest interest payments out of a noble desire to make math easier for yours truly - made $0.50 each year, for a total of $2.50. What's more, I could have done that, effectively reducing my debt to you by 25%.
Of course, this isn't on that scale, but that is the risk of delayed payment.
A treasury is an investment that you get when you lend the government money. They promise to pay you back with X% interest in a certain time period. In this case, we are talking about 1 month.
So, with the increase in interest rate from 0.10% to 0.27%, investors demand more return because they think it is now 170% more risky (Simply calculate the difference of 0.27 - 0.10), to lend the government money for a short-time period (1 mo), than it was just 7 days ago.