I read this news today:
On Wednesday, the 3-month Treasury bill -- considered one of the safest short-duration assets -- saw demand surge so high that its yield briefly dipped into negative territory for the first time since 1940.
That is crazy! It is like buying a $100 treasury bill that will pay, say $2 in interest, for $103. Why would anyone do that? Why not just put the $103 under your mattress?
Unfortunately, it isn’t just investors making a mistake or acting irrationally. It is the culmination of rational people reacting to market results, fears and expectations. Consider that large investors (like Money Market funds) can’t “cash out.” What are they going to do, walk into their local branch and say, “I’d like to withdraw $248 million, please.”
Later that night --
Mrs. Fund Manager: Honey, why is our mattress three feet higher? Fund Manager: T-bills have a negative yield.
No comments:
Post a Comment