Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.
Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.
I’m sorry, but putting your money in a Treasury Bills at a negative rate is completely stupid. You can put your money in an FDIC bank account and at least get some positive return while your money is protected for the first $100,000 of deposits. If you have a smaller amount to invest ($5,000 or less) , why not invest in the I-Bond? Married couples can sock away $10,000 in I-Bonds this month and then turn around and do it again in January. You can double all those numbers if you purchase half electronically via TreasuryDirect and the other half with paper bonds. So, a married couple could purchase $40,000 worth of I-Bonds over the next 30 days.
Fixed rate = 0.70%
Composite rate = 5.64%
The I-Bond is adjusted for inflation twice per year.
Call me financially simple, but with these options readily available…why would ANYONE put money into a T-Bill that has a negative rate of return?
! Because the folks who are putting it into treasuries are talking about their 401k and IRAs. They don’t have the option of using FDIC bank CDs or savings accounts. They need to leave their jobs to empty their 401ks.
That’s why. Another reason why the 401k is the biggest scam devised since Ponzi. Not only will returns be lower, but taxes on this PRETAX income will be much, much higher under President “share the wealth” than when 401ks began.
My money is in CDs and savings accounts. And paid off physicial assets like houses/
Clueless, I have a chunk of MY IRA money in a nice federally insured CD. But you know, as the article says they are doing Obama a huge favor with that kind of investment.
According to Bloomberg Television today, the last time T-bills were at a negative rate in this country was 1941.
Sick-Tired [#1]: The surge in demand for Treasury securities comes, I suspect, from investors seeking a safe place to park sums far exceeding the current $250,000 limit on FDIC insurance. If you have $50 million in cash, you need to keep it somewhere—and these investors perceive keeping their money in investments other than Treasury securities (e.g., commercial paper, money market funds, or largely uninsured certificates of deposit) as riskier or otherwise costlier than accepting a negative return on Treasury securities.
Thanks all. I had not considered the 401ks. I also don’t think in such large financial sums [like $50 Million]. That does explain it. It isn’t “stupid” under those circumstances, but it is very sad.
As usual, I come away from T19 better educated. Thanks again, all.
Re # 5
Irenaeus,
I can think of places that are pretty much as safe as Treasuries which would produce a better yield. Although the United States has a high credit rating we don’t have a monopoly on AAA bonds. This is foolish paranoia. If people are so worried about the safety of “cash” that they are paying to lend money to the Treasury they should go buy gold. (I actually think that’s not a bad investment though for different reasons.)
Ad Orientem [#7]: Which AAAs do you have in mind?
Insofar as my park-a-bundle theory [#5] holds true, Treasury securities are serving as a stormy-weather substitute for money market funds and the like. Purchasers want a short-term, highly liquid investment denominated in U.S. dollars.
Gold isn’t liquid enough. T-bills are used for liquidity. This is where you park funds for a couple months, not years. Irenaeus is right, this is driven by institutional investors.
… and if deflation hit 3%, a return of minus 1% would be 2% to the good for that parked $50 million.
Gold poses the same short-term risks as a sound, widely accepted foreign currency: its price in dollars fluctuates. The
entities parking this money aren’t out to make trading profits. They want to preserve the value of their principal.