What's This About Low Two Year T-Bill Yields? Buy, Buy, Buy, Bitches!

Monday, November 23, 2009 , 0 Comments

Trouble in T-bills? Nah, we're still chugging along.


The Treasury sold $44 billion of two-year notes at a yield of 0.802 percent, the lowest on record, as demand for the safety of U.S. government securities surges going into year-end.

Investors are piling into short-term Treasuries on concern that this year’s rally in risk assets has outpaced growth prospects and as Federal Reserve officials signaled interest rates will remain near zero for an extended period. Rates on some Treasury bills turned negative last week for the first time since last December, when global credit markets froze.

“It just points to ongoing yield grab at the front-end,” said Carl Lantz, an interest-rate strategist in New York at Credit Suisse Group AG, one of 18 primary dealers that trade with the Fed. “People are being pushed further out the money market curve when you have bills at the front-end trading at zero or negative.”

The last auction, a $44 billion offering on Oct. 27, drew a yield of 1.02 percent. Indirect bidders, a class of investors that includes foreign central banks, purchased 44.5 percent of the notes today, the same as at the October sale. The average for the past 10 sales was 44 percent.

The size of today’s two-year offering matched the record set last month. The Treasury is scheduled to sell $42 billion of five-year securities tomorrow and $32 billion of debt maturing in seven years on Nov. 25, both record amounts.

Lucky for the Treasury, there's a sucker born every minute. And if we run out of suckers, we've got plenty of foreign central banks that would be more than happy to pull the old bait-and-switch on our behalf I'm sure.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.