Tuesday, December 09, 2008

This day in history...

It wasn't on the news tonight, but the yield (interest rate) on the 3-month Treasury bill went negative today for the first time in history. This is like paying someone to borrow your money.

Various explanations abound. John Jansen writes:

What is going on in the front end? Central banks have flooded the system with money and the system is awash in a surfeit of liquidity. That money is searching for a home.

I also think that very large chunks of money which left the stock market and money funds when Lehman crumbled is in government-only funds and that creates a tremendous demand for bills.

December is always a month with bill demand as the process of sanitizing balance sheets for year end examination is always a concern. With the trials and tribulations in the financial markets this year that demand will be orders of magnitude larger than normal.

These are interesting times.

A guy in the NY Times article linked above says:

''There's a price for safety,'' said Peter Crane, president of money market mutual fund information company Crane Data LLC. ''Down slightly is the new up.''

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