Treasury Bills Trade at Negative Rates as Haven Demand Surges (3 month T-bills)

[Pale Blue Dot]

Source: Bloomberg

Dec. 9 (Bloomberg) -- Treasuries rose, pushing rates on the three-month bill to negative 0.01 percent, as investors gravitate toward the safety of U.S. government debt amid the worse financial crisis since the Great Depression.

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the securities in 2001.

“It’s the year-end factor,” said Chris Ahrens, an interest-rate strategist in Greenwich, Connecticut, at UBS Securities LLC, one of the 17 primary dealers that trade directly with the Federal Reserve. “Everyone wants to be in bills going into year-end. Buy now while the opportunity is still there.”

The benchmark 10-year note’s yield dropped nine basis points, or 0.09 percentage point, to 2.65 percent at 2:31 p.m. in New York, according to BGCantor Market Data. The 3.75 percent security due in November 2018 gained 27/32, or $8.44 per $1,000 face amount, to 109 19/32. The yield touched 2.505 percent on Dec. 5, the lowest level since at least 1962, when the Fed’s daily records began.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aJP3g3Yhzat0&refer=home

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Moderators - If you think that this is too similar to my previous post on 4-week T-bills, please merge that one into this one, as this one is even more frightening.

[Dr.Phool]

1. You're damn right it's more frightening.

I like that. "Buy now, while the opportunity is still there".

Can it go lower?

[proud progressive]

2. could someone please explain to me why short-term cd's @ up to 5% are not just as safe

[Cassandra]

5. Perhaps the bank that's offering that....

REALLY needs to attract some funds. Also, where else but treasuries might someone go if they have a whole lot more than $250K?

[Kolesar]

6. Spread their savings to more than one FDIC-insured bank, then

(If I understand your question correctly.)

[KurtNYC]

3. It scared Bloomberg news so badly that they wrote "worse" for "worst"

Year end nonsense -- window dressing.

[Cassandra]

4. And to think I was turning my nose up at 3 and 4%...

last year some time. I kept thinking it has to go up just to get other countries to buy some. Seems the jokes on me.

[ret5hd]

7. Why not just stay in cash?

[Pale Blue Dot]

9. That's the scary part

Some people are obviously betting that three months from now they will have saved more money by buying T-bills at negative interest than they would have if they had bought stocks, bonds, put it in a bank account OR stuffed their money in a mattress.

They may be wrong, but it's frightening that people are taking that bet.

[gravity]

11. T bills are safer

Especially for large amounts of money that won't be insured by the FDIC.

[ret5hd]

13. How unsafe is large sums of money in a safety deposit box?

[gravity]

16. You could put cash in there

but buying T bills is much easier and more liquid. Very large amounts of money will start to become impracticable too.

[ret5hd]

17. How are t-bills more liquid than cash?

[gravity]

19. You can sell them instantly

Having millions of dollars in cash bills will be harder to coordinate.

[ret5hd]

20. How long does it take to sell cash?

[gravity]

21. Not long

Cash is still a very liquid investment.

I am just saying if you have millions of dollars, you can open up a bank ask for millions in cash bills, and wait for the bank to actually get that many dollar bills delivered into a deposit box. Or you can just buy a T-bill.

If you have small amounts of money, it is not going to make much of a difference. It is just in the cases where you have such large amounts of money that it starts to become impracticable.

[pitohui]

24. what do you mean by "sell cash"?

as an example i know someone who needed to withdraw $28K from a small branch bank -- he was told he had to wait 48 hours for the money to be delivered (they actually got it there faster than that, i guess he got lucky, but he was told in future to phone them well in advance)

some people are millionaires, they are pretty much not ever going to get millions of dollars delivered, besides the practical difficulty, there would be fbi or another gov't authority alerted to see where the cash was going (all cash transactions 10K and above MUST be reported to the feds) or to see if the person was being blackmailed, had a kidnapped spouse, etc

[pitohui]

23. it's shockingly unsafe and here's why (hint, read your homeowner's policy)

the stuff in your safety deposit box is not covered under the bank's fdic, if you think about it, has to be that way, bank has no way to verify what's in your "box"

your homeowner's policy insurance likely only covers $200 (i don't mean two hundred thousand, i mean two hundred dollars and zero cents period flat) -- that's what mine used to cover when it covered cash at all

i've known several people to have cash "lost" from a deposit box -- i'm guessing the most common reason is a dispute with a tax authority (could be state or federal) and one day the person goes to the bank to find -- instead of their cash in the box -- a receipt from the tax authority in question -- admittedly i was in a cash business so i prob. know more people than average this has happened to -- but yeah you have a risk of loss in a safety deposit box, it's a place to put your paperwork and your jewelry, but risk your financial future to it? nooooooo, please

now maybe you're a renter and have no homeowner's policy at all, i would astounded if your renter's policy (most people don't even HAVE renter's policies) would cover more than $200 in lost cash

so that's the problem w. safety deposit box, they're fine for the extras, by all means put your extra gambling cash there if you like but don't gamble your future on a deposit box

[whistle]

8. Paulson and Bernanke seem to have really f**ked things up

...I'm wondering if this singles the beginning of super-hyper inflation, Bernanke flying over the country in a helicopter dropping trillions of dollars in newly minted U.S. currency?

[Tab]

10. Let me understand this

as I've never been in a negative trading situation. Are they basically saying, you can buy our t-bills, and they'll "only lose" .01%? This is more attractive, therefore, than stocks where you can lose 30% (or more, depending on what car manufacturer you invest in)?

As someone else posted upthread, why not just stay in cash, unless it's a suggestion that cash might not be safe?

If I'm understanding this right, I agree it's very scary. Someone please tell me I'm getting this wrong. I'm not a financial wizard, I just have a "regular" understanding of how the markets work. I pray I'm missing something here.

It seems to me that a loss is preferable in this market, as long as it's a "known" loss. That way of thinking I find quite scary indeed.

[Pale Blue Dot]

12. I don't think you're missing anything. nt

[ipfilter]

14. So if I buy a T-Bill for $100 in three months I get $99.99 back?

Am I reading this right?

[Festivito]

15. Keeps you from spending it on anything before then.

Makes sure you get it all back, except for the carrying fee.

So, sad.

[ipfilter]

18. It sounds like a car loan where the bank pays me interest

for them to loan me their money.

[4dsc]

22. Mortgage rates are dropping like a rock too

Looks like I'm going to be in for a low interest refy coming up soon.. I hope to get below a 5% rate.. That would be great!!