WTF Treasury Notes – A Negative Yield?

An example of combustionImage via WikipediaT-Bills Negative?

Q: When was the last time you ever saw 3-month Treasury Bills yield a NEGATIVE amount?


What amazes me the most is the amount of cash that was willing to be dropped into this hole: $30 Billion. According to Barry (below) the ‘demand was so great even for no return that the government could have sold four times as much’.

Check it out, via Barry at TheBigPicture:

We mentioned this yesterday as it happened, but Treasuries traded down to previously unseen yields. The 3 month T-bill went negative yield for the first time ever.

When was the last time you invested in something that you knew wouldn’t make money?

In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return.

The news sent a sobering signal: in these troubled economic times, when people have lost vast amounts on stocks, bonds and real estate, making an investment that offers security but no gain is tantamount to coming out ahead. This extremely cautious approach reflects concerns that a global recession could deepen next year, and continue to jeopardize all types of investments.

While this will lower the cost of borrowing for the United States government, economists worry that a widespread hunkering-down could have broader implications that could slow an economic recovery. If investors remain reluctant to put money into stocks and corporate bonds, that could choke off funds that businesses need to keep financing their day-to-day operations.

Investors accepted the zero percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.

In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.

As Barry concludes in a rather understated manner: ‘Quite remarkable.’

I am Jon. Do you think there’s a recession underway, or a full-fledged Depression?

Image 1