What would your reaction be if you had a friend who had reached the limit on 20 different credit cards and then came to you to borrow $100? Then imagine that you actually said yes, and when you went to give your friend the $100, he or she actually asked for $101 just for the privilege of loaning the money. Well, that is exactly what is happening (to a lesser degree) in the US T-bill market. As just another example of the crazy times we are living in, the yield on 3-Month Treasuries went negative today. There was a time when an event such as this was unimaginable. Today it barely gets noticed.
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One is left to wonder how this parallels the period leading to FDR's inauguration. At the time the systemic breakdown of the banking system was in its death throes. Now, with that lesson standing in time and institutional facilities, though stretched, much differently configured, one wonders whether this rush into Treasuries is but an innocuous, natural response to a bankrupt financial system standing at the precipice or, contrarily, an attack meant to throw it over the edge...
Posted by: Tom Chechatka | December 09, 2008 at 09:00 PM
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