Even as the Dow Jones industrial average rose nearly 300 points on growing confidence on Wall Street on Monday, a Treasury bill auction yielded a new low of less than 0.01%, noted Miller & Tabak analyst Tony Crescenzi. That’s a sign that investor demand for T-bills, considered the safest short-term assets around, is still on the rise despite a return of nearly zero.
“Things are bad, and they don’t look like they’re getting better,” said JPMorgan Chase economist Michael Feroli. The tone of the market was a bit better than last week, and Treasury yields recovered modestly on expectations of a $15 billion automaker bailout, but he cautioned against looking too much into “the day-to-day movements.”
As the reality of the mortgage meltdown and its massive, widespread aftershocks set in, investors and the financial industry are readjusting their strategies and becoming more cautious. Even if the government’s bailouts and other actions succeed in propping up the housing market, unemployment is worsening ”” a factor that will mean more losses for banks, and a tougher time for the government as it tries to stabilize the fragile economy.
Well, look at it this way: it’s making it cheap to fund a lot of deficit spending!