Saturday, Dec 13, 2008
[theirs] Who, exactly, was crazy enough to purchase securities with a yield of zero (or less)?
EWI: T-Bills Are Telling You What The Media Won't
Leading on from MGs post yesterday :"Was the $32 billion supply of ZERO-YIELD securities available at today's Treasury auction enough to meet the demand?"
Posted by techieman @ 09:03 AM (490 views) Add Comment
5 Comments
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1. mountain goat said...
They dont try explain why people prefer cash to T-Bills. Must be safer than cash in a bank that could fail, or hoarded in a house that can burn down. The US gov have never failed to pay the bearer of a T-Bill. In fact I have read stories of the Treasury Dept going to extraordinary lengths to make sure someone were paid in time once when there was a problem with the delivery service. All that to maintain their reputation of never ever failing to pay back. This reputation is their key to being able to borrow, their lifeline for a live for today pay it back tomorrow lifestyle. In the end the full military might of the US stands behind this financial product making it the safest investment in the world.
2. mountain goat said...
sorry meant T-Bills to cash of course
3. techieman said...
MG -actually they do explain why but not there. Thats just a teaser to get you to subscribe - not that i am saying you should of course, although the book "conquer the crash" is recommended: http://www.amazon.com/gp/reader/0932750532/ref=sib_dp_pt#reader-link [gives you a peak inside]
4. jonb said...
If you have billions of dollars to invest, putting it under the mattress isn't an option, so paying the Federal Reserve 0.1% of the balance to look after your money may well be better than some of the alternatives.
5. mountain goat said...
Not sure if anyone reading this thread anymore but found some ideas by John Mauldin on who is buying at zero yield.
- Banks who want to make their end of year balance sheets look pristine.
- Futures traders. Thinking goes as follows. Futures contracts are seldom paid off in full, so you might pay just 10% for example. But with credit crunch there are many more unexpected margin calls, forcing you to pay the full amount. So rather than be forced to sell if they get a margin call, traders are holding the equivalent in T-Bills as liquidity.