Tags: Treasury | Bills | Investment | Bubble | us | economy

Some Fear Treasury Bills Are Next Investment Bubble

By    |   Wednesday, 25 May 2011 09:41 AM

Over the last few years, financial markets have seen one asset after another turn into a bubble, from real estate, to commodities, to junk bonds. And now it may be the turn for Treasury bills, The Wall Street Journal reports.

The yield for three-month T-bills dropped as low as 0.01 percent earlier this month and recently stood at about 0.05 percent. Three-month T-bill rates hadn’t dropped that far since late 2009. They began the year at 0.12 percent.

What’s happening is that the Treasury is issuing fewer bills as the government hits its $14.3 trillion debt limit, new regulations are leading banks and money-market funds to purchase more Treasury bills, and slowing U.S. economic growth is sparking demand for T-bills too.

"If people are willing to accept zero yield, . . . that's telling you something," George Goncalves, head of U.S. interest-rate strategy at Nomura Securities International, tells the Journal. "Some of it is a macro story, that there's a belief rates are going to be here for a long time."

Other market experts agree with him.

“There is a lot of cash looking for short-term paper that doesn’t have anywhere to go, and it’s keeping note yields near zero,” Thomas Simons, a government debt economist at Jefferies Group, recently told Bloomberg. “As bill supply declines, expect more of the same in the very front end.”

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Over the last few years, financial markets have seen one asset after another turn into a bubble, from real estate, to commodities, to junk bonds. And now it may be the turn for Treasury bills, The Wall Street Journal reports. The yield for three-month T-bills dropped as...
Treasury,Bills,Investment,Bubble,us,economy
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2011-41-25
Wednesday, 25 May 2011 09:41 AM
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