नास्तिक (heterodox)

My name is Ramesh and this is my personal blog.

No yield is good yield

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or so it seems. You can buy 1 month and 3 month US treasury bonds now, and get back what you invested on maturity. Needless to say, the last time this happened was during the great depression.

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People are willing to accept lower and lower interest rates from US Treasury now, as it is seen as a very safe place to invest money in these troubled economic times. So, there is a clear flight-to-quality reason for the treasury yield rate drop. But why would the yield hit zero? Why not shove the money under the matress, instead of doing something bizzare like investing on something that returns nothing? Well, fund managers of money funds that only invest in safe Treasury bills do not have the option of not ivesting. Demand for treasury bills from such fund managers has caused this event.

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Written by Ramesh

December 11, 2008 at 1:14 am

Posted in investing

Tagged with , , ,

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