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[Suresh]

Zero Hedge: Post-Lehman Deja Vu As T-Bill Yields Turn Negative

The last time Bill yields turned negative (in essence investors paying the Government to hold their money for them) was in the days after the Lehman bankruptcy, when the entire world was about to blow up. So why did Bill yield for January maturity just turn negative once again? In other words, why are investors suddenly running for the hills? As Dow Jones reports, January and February bills hit a yield of -0.03% earlier. Some explanations have to do with Bill scarcity, as nobody wants to be exposed to anything beyond 3 months down the curve, let alone 1 year. However, the fact that bond investors may not be buying into the whole recovery BS (or just realize that there is nobody willing to roll near-dated treasurys into longer-tenor pieces of paper) and are once again running scared and willing to pay Ben Bernanke to hold their money for them should be very, very troubling. Additionally, could there be something more pressing and/or catalytic? We have not heard peep from any of the big banks in a while...
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Even more surprisingly, the 1-3 month bill curve has also gone negative, indicating that there is something veru much awry with demand along the Treasury curve.
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Suresh

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[Suresh]

A negative yield on the the 1-month T-bill doesn't necessarily mean that a Lehman redux is around the corner. It may just be a reflection of a reduction in the supply of T-bills relative to demand, as the Treasury tries to issue more and more longer dated Treasuries.
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Bloomberg: U.S. One-Month Bill Rate Negative for First Time Since March
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The rate on the four-week security dropped to negative 0.0101 percent, the lowest since it reached negative 0.015 percent on March 26. The Treasury sold $10 billion of four-week bills on Jan. 26 at a rate of zero percent, the second auction of the securities in three weeks at zero percent. Winning bidders will receive no interest on their investment.
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Bill rates turned negative for the first time and note and bond yields reached record lows at the end of 2008 as investors sought refuge in government securities after the collapse of Lehman Brothers Holdings Inc. and a freeze in global credit markets. Bill yields turned negative again in March as banks and financial firms sought to bolster their balance sheets at the end of the quarter.
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_________________
Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Bloomberg: Treasury Bill Rate Falls Toward Zero on Quarter-End Demand
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The rate on U.S. government debt maturing in one month fell to 0.0091 percent, the lowest level since Feb. 1, before rising to 0.016 percent. The three-month bill rate was 0.071 percent after dropping yesterday to 0.0487 percent, the lowest since Jan. 26. Six-month bill rates advanced to 0.158 percent after falling yesterday to 0.136 percent, the lowest since Jan. 29.

Buttressing demand for bills are Securities and Exchange Commission rules that went into effect in May limiting risk and a reduction by the Treasury in the number of bills being sold as it lengthens average maturities. Investors are attracted to the safest maturities at quarter-end to improve the quality of assets on their balance sheets. Negative bill rates mean investors are willing to pay the government to hold their money, protecting them from the potential losses of other investments.
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_________________
Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.