Some Treasury bills maturing at the start of next year traded at negative rates last week, a sign of investors' strong demand for the safest securities at a time when T-bills are in scarce supply.
When market participants buy Treasury bills at negative rates, they are essentially paying the government to keep their money safe.
Rates on issues maturing in early January and February slid as low as -0.03%, traders said. Some issues maturing in the first two weeks of December also slipped, trading at flat to a bit negative Thursday.
The rate on the three-month T-bill fell as low as 0.007% and was at 0.013% late Thursday.
Bill yields last fell below zero in late 2008 amid the financial market panic that was triggered by the bankruptcy of Lehman Brothers Holdings Inc. The decline this time, though, isn't driven by the same sorts of fears -- it is more about a scarce supply of T-bills amid strong demand for safe assets, given the hazy economic outlook.
The amount of T-bills in the market has shrunk with the government letting the bills in its Supplementary Financing Program — which financed the ballooning deficit though the issuance of bills — mature rather than sell new bills to roll over the debt. At the same time, money-market investors face fewer options to park their cash.
Treasury bond prices also powered forward as investors continued to position for a long period of low interest rates. In late afternoon trade, the 10-year note was up 5/32 point, or $1.56 per $1,000 face value, at 100 7/32. Its yield fell to 3.349% from 3.368% Wednesday, as yields move inversely to prices. The two-year was up 2/32 point to 100 18/32 to yield 0.717%, and the 30-year bond was up 7/32 to 101 16/32 to yield 4.287%.
