Thursday, December 11, 2008

Zero Percent Yield

Investors now want zero yield investments. From the NY Times is the article on the US government selling bonds with a 0.0% yield. Cheap way to fund the deficit, but not a good sign for economy.

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.
“The last time this happened was the Great Depression, when people are willing to accept no return on their money, or possibly even a negative return,” said Edward Yardeni, an independent analyst. “If people are so busy during the day just protecting the cash they have, it’s not a good sign.”

Part of me screams "Quick refinance the whole US Government debt!" That part is looking for the metaphorical lemonade.
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