3 month t-bill yield 0,02% - maybe traded negative | Hacker News Reader

3 month t-bill yield 0,02% - maybe traded negative

reuters.com

11 pointsmhb11 comments

And the cost of insuring 10-year T-notes against default (can you even believe that that market exists?) has risen to 26 basis points. http://www.reportonbusiness.com/servlet/story/RTGAM.20080917...

insuring 10-year T-notes against default

sold by the same people who are selling you "sun goes nova" insurance

US treasuries can be paid out with created accounts. this is US law. inside the US, treasuries essentially cannot default by definition while the government and banking system is intact. if the government and banking system dissolve, who is going to pay out these claims and how? nonsensical

There is a flight to security on concerns about the stability of money market funds. If your startup uses money market accounts for working capital/payroll you should make sure the fund doesn't have corporate bond exposure

I never quite understood why startups do that - I mean, from an investors point of view, isn't there enough risk already? (I guess the assumption was that money markets was as good as cash).

pedestrian mm's tend to de-emphasize corporate paper

and yes, the amount of money your startup has in its mm is definitely pedestrian

Is there any way to short T-bills? This might be a good opportunity...

If you crave excitement and expect everything to go to hell, you can buy some SDS.

these will not go negative, this yield was a temporary spasm

think about it, who is going to volunteer to lose money on short term govt debt? just leave your money in cash. its not like inflation is going to destroy your cash in 90 days. especially considering that we are entering a deflationary period

I think the people buying these are worried that the cash won't exist in 90 days. If the bank they deposit their cash in goes bankrupt they get nothing. The people buying the T-Bills are well above the $100k FDIC limit. Therefore, by buying the T-Bill, they protect their downside by betting the US government does not go broke in the next 90 days.

That would be my guess as to why they want to stash their money away for 90 days. After 3 months the buyer can find out which bank still exists to even take a cash deposit. Cash in the T-Bill and decide what to do. In the meantime, buyers have 3 months to figure out what to do in this market. Its almost like hitting a pause button with your money and giving yourself time to think this out.

ps. Not a finance guy here by any means.

The people buying the T-Bills are well above the $100k FDIC limit

dude, it is an utter triviality to spread your money in cash-equivalent 100k increment accounts, brokerages do this all the time. no one takes a loss on treasuries because they have $100k + n in their account. the eight people who upmodded you have simply never had to perform this trivial transaction

Yes, it would be trivial for me to spread a few hundred thousand around a few banks so that I could be within the FDIC limit. What is not trivial is a brokerage spreading around $50MM across 500+ banks.

What I was trying to explain is that the people buying the T-Bills aren't individuals looking to put their money some place safe. These are large institutional investors looking to park millions (hundreds of millions?) of dollars in a safe place till they can figure out what to do.

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