Comments on: Treasury 3 Month Bill Yields Fall To Negative http://www.tradersnarrative.com/treasury-3-month-bill-yields-fall-to-negative-3250.html Freshly squeezed market commentary & analysis Fri, 19 Mar 2010 17:50:15 +0000 http://wordpress.org/?v=2.0.2 by: Babak http://www.tradersnarrative.com/treasury-3-month-bill-yields-fall-to-negative-3250.html#comment-57495 Sat, 21 Nov 2009 01:46:32 +0000 http://www.tradersnarrative.com/treasury-3-month-bill-yields-fall-to-negative-3250.html#comment-57495 James, here's today's commentary on this from Rosenberg: <blockquote><strong>Negative Interest Rates?</strong> That is indeed what occurred yesterday at the very front end of the yield curve as U.S. banks scrambled to add low-risk government securities to their balance sheets for year-end. Hence a big squeeze in the Treasury bill and the yield on the two-year note is trading south of 70bps again, just as we saw a year ago. We can only say that if the markets and the macroeconomic backdrop have truly come back to normal, this is hardly a condition we would be seeing right now. The financial system is still far from healthy, even as bonus season looms on Wall Street.</blockquote> James, here’s today’s commentary on this from Rosenberg:

Negative Interest Rates?
That is indeed what occurred yesterday at the very front end of the yield curve as U.S. banks scrambled to add low-risk government securities to their balance sheets for year-end. Hence a big squeeze in the Treasury bill and the yield on the two-year note is trading south of 70bps again, just as we saw a year ago. We can only say that if the markets and the macroeconomic backdrop have truly come back to normal, this is hardly a condition we would be seeing right now. The financial system is still far from healthy, even as bonus season looms on Wall Street.

]]> by: James K http://www.tradersnarrative.com/treasury-3-month-bill-yields-fall-to-negative-3250.html#comment-57464 Fri, 20 Nov 2009 09:15:52 +0000 http://www.tradersnarrative.com/treasury-3-month-bill-yields-fall-to-negative-3250.html#comment-57464 "Even more shocking, for some short term government bonds maturing in January 2010 the rate fell to negative. I’m not sure why everyone is suddenly clamoring for US government bonds. Are they afraid that a new shock is coming to the stock market? is there some tragic news that is about to shake global financial market? or are major institutional investors simply afraid that the low interest rate environment and the dollar carry trade will inevitably lead to even more trouble? And if so, how in the world is investing in US dollar denominated assets and trusting the US government in line with that sort of thinking? Honestly, I’m puzzled." Seems to me that this is mostly "return of capital" (as opposed to "return on capital") buying for the Turn. My impression is that this is different than last year at this time where trading desks were truly worried about default by a counter-party. The transformation from IB to "real" bank by places like GS and others means that there are more buyers of "safe" UST short term investments for balance sheet purposes for the December 31st turn. Add in the huge amounts of liquidity right now..... This seems to be what might be driving this return to negative bill yields. Less "shock and awe" and more "sock (away) and yawn". Basically, more people punting over year-end, I would guess. “Even more shocking, for some short term government bonds maturing in January 2010 the rate fell to negative. I’m not sure why everyone is suddenly clamoring for US government bonds. Are they afraid that a new shock is coming to the stock market? is there some tragic news that is about to shake global financial market? or are major institutional investors simply afraid that the low interest rate environment and the dollar carry trade will inevitably lead to even more trouble?

And if so, how in the world is investing in US dollar denominated assets and trusting the US government in line with that sort of thinking? Honestly, I’m puzzled.”

Seems to me that this is mostly “return of capital” (as opposed to “return on capital”) buying for the Turn. My impression is that this is different than last year at this time where trading desks were truly worried about default by a counter-party. The transformation from IB to “real” bank by places like GS and others means that there are more buyers of “safe” UST short term investments for balance sheet purposes for the December 31st turn. Add in the huge amounts of liquidity right now….. This seems to be what might be driving this return to negative bill yields. Less “shock and awe” and more “sock (away) and yawn”. Basically, more people punting over year-end, I would guess.

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