Reuters - The U.S. Congress approved an increase in the country's debt limit through March 2015, bowing to President Barack Obama's demands for a debt limit increase without any conditions, but only after a dramatic Senate vote on Wednesday.

Final action in the Senate followed an hourlong nail-biting procedural tally forced by the objections of Republican Ted Cruz, a conservative Tea Party favorite. It appeared at first there would not be enough Republicans to join the Democratic majority and advance the bill.

A decision by Senate Republican Leader Mitch McConnell and Senate Republican Whip John Cornyn, who are both up for re-election this year, to vote to advance the measure appeared to kick the procedural tally over the needed 60 votes.

After a few more tense minutes of huddling on the Senate floor, several other Republicans changed their votes to follow their leadership. In the end, 12 Republicans joined Democrats in advancing the bill, on a vote of 67-31.

The measure, which then passed the Senate on a final, party-line vote of 55-43, now goes to Obama to be signed into law.

The House of Representatives, where Republicans hold a majority, passed the measure in a close vote a day earlier, after Republicans dropped the confrontational tactics they had used in similar votes over the past three years.

The advance of the measure this week has brought relief to financial markets. Investors were becoming increasingly jittery ahead of Feb. 27. The U.S. Treasury has been warning that its borrowing authority would be exhausted by then, putting federal payments at risk.

Without an increase in the statutory debt limit, the U.S. government would soon default on some of its obligations and have to shut down some programs, a historic move that would have likely caused severe market turmoil.

Reaction in most financial markets to the drama on the Senate floor was muted, with U.S. stocks holding near the unchanged mark on the day and most U.S. Treasury debt prices remaining modestly lower for the session.

But there was visible relief in the short-term interest rate market. The rate on the one-month Treasury Bill, which had jumped in the past week on concern over a protracted showdown over raising the debt ceiling, dropped to its lowest in three weeks, ending the day at just 0.01 percent.

Treasury Secretary Jack Lew said in a statement that Congress' action would boost economic growth by making businesses and investors more confident.

CRUZ WANTED CONDITIONS ON DEBT CEILING

Obama and his fellow Democrats have demanded that the debt ceiling be raised without any conditions.

But Republican Cruz, whose influence helped push Congress into a government shutdown last October, objected to a simple-majority vote on the debt limit because he wanted to attach "meaningful conditions" that would help reduce U.S. deficits.

Because of an approaching snowstorm, senators agreed to waive the required debate time and hold the procedural vote on Wednesday, with the final vote immediately following it.

After the results were in, some Republicans said their party was furious with Cruz for forcing a number of them to cast votes that could open them up to attacks from Tea Party conservatives opposed to any debt limit increase whatsoever.

"He accomplished nothing except forcing a number of Republicans to swallow hard and show some courage," one aide said.

Both McConnell and Cornyn face conservative opposition in upcoming primary elections. McConnell's primary opponent Matt Bevin wasted no time in putting out a statement denouncing the senator's move, saying "Kentucky deserves a senator that will not keep voting to suffocate our children and grandchildren with trillions of dollars in debt."

The Senate Conservatives Fund, a political action committee founded by ex-Senator Jim DeMint, also hit McConnell, tweeting that "Mitch McConnell just voted with the Democrats to advance yet another debt limit increase. Kentucky deserves better."

Cruz, who is from Texas, made no apologies for his maneuver and said failure of the procedural vote would have presented an opportunity to address Washington's spending problems.

"The next step would have been, I believe, that we would have come together to work on meaningful structural reforms to address the out-of-control spending," Cruz told reporters.

Senator Bob Corker, a Tennessee Republican who cast a "yes" on the procedural vote, told reporters that after McConnell had voted "yes," discussions took place on the Senate floor and then other Republicans stepped in to "help him out".

Republicans who switched their votes from "no" to "yes" included Senator John McCain of Arizona, who joked later that his shoulder had been dislocated in arm-twisting on the Senate floor.

McCain said much of the discussion in the tense Republican huddles focused on getting past the debt limit to issues where Republicans could gain more political traction, such as healthcare.

"Nobody persuades me," McCain said of his vote. "I just thought it was the right thing to do."