US 3-Month T-Bill Yields Plunge Below 0%

Demand for the relative safety of short-term government debt prompted investors Tuesday to buy up $32 billion in new three-month bills (UST3MO) (usually considered as a risk-free benchmark return on U.S. assets) at an unprecedented yield of 0%. The rock-bottom yield is the lowest since the government began auctioning the securities in 1929 demonstrating once again that investors are eager to simply get their principle back.

According to WSJ, the three-month yield fell to between negative 0.1% and 0.2%. However, there was no confirmation if trades were executed at these levels. The yield on the benchmark 10-year note (UST10Y) rose by 28/32 yielding 2.65%. The five-year price rose by 18/32 and yielded 1.609%, while the two-year gained 5/32, for a yield of 0.854%. 30-Year Treasury rose 2 20/32, yielding 3.044%.

Despite some signs that credit conditions are improving, minus-zero-yields suggest that the appetite for the safety of T-bills isn’t lessening. Investors are still seeking a haven in the relative safety of government debt as well betting on a deflationary scenario in the coming months.

Treasurys have returned 11.7% so far this fiscal year, according to an index compiled by Merrill Lynch (MER).

The Treasury Dept. announced Monday (Dec. 8) it will sell $28 billion in three-year notes on Wednesday and $16 billion in 10-year notes on Thursday.

Photo: BigCharts

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