नास्तिक (heterodox)

My name is Ramesh and this is my personal blog.

No yield is good yield

leave a comment »

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.


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.


Written by Ramesh

December 11, 2008 at 1:14 am

Posted in investing

Tagged with , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: