The need to sustain capital is far outweighing what is now a luxury: to earn interest on capital.
and this:
The Treasury’s actions to support the credit market, including the massive $85 billion loan for American International Group, will be funded by special T-bill offerings. The first of these, with a very large $40 billion auction size, found eager buyers and a low bid of zero percent — memorable evidence of the stampede underway for Treasuries. The yield right now on the 3-month bill is 0.04 percent.
Emphasis mine. Major investors are converting everything they have to cash-equivalents. Remember, if you’ve got more than $100k in investments, you don’t want to just stash it in the bank because of FDIC limits — and even FDIC insurance is a bit shaky nowadays. So you go with “safe” Treasuries. But zero percent!!!! Daaaaamn. With transaction costs, that means these folks were willing to PAY FOR THE PRIVILEGE of being able to buy Treasury bills.
Both quotes taken from Econoday’s close-of-the-day “Market Reflections” from yesterday. I’ve met the founder and CEO of Econoday, and she’s a sharp cookie. If you’re just starting to pay attention to the financial markets because of the turmoil, Econoday’s Week at a Glance is a great place to start. Everything, and I mean everything, is explained and analyzed in non-technical terms.
Interesting times, indeed. Why, soon enough we could be back to this:
Ammunition as Money?“Massachusetts also designated musket balls legal tender at four per penny [in the 1600s].”
So reports Robert G. Natelson, Paper Money and the Original Understanding of the Coinage Clause, 31 Harv. J. L. & Pub. Pol’y 1017, 1037 (2008), quoting 1 Jerry W. Markham, A Financial History of the United States 46 (2002).
–Eugene Volokh, the Volokh Conspiracy
I wonder how much of the demand for Treasury Bonds is coming from mutual funds that are looking to add them to their portfolio before 9/30. It’s been a long understood practice for them to dump things that will make them look bad and buy up those will make them look smarter right before the end of each quarter (and then reverse their actions right after) because they have to publish their holdings as of the end-of-quarter date.
They routinely take a loss to be able to show that they own famously popular stocks and do not hold any of the well known dogs. I would think that showing how savvy you were to get out of stocks and into bonds would be the same.