The Wall Street Journal writes "T-Bills Stay Hot Despite Low Yield". It says, "Dwindling supply and rising demand are causing a squeeze in the market for three-month Treasury bills, considered among the safest investments, that is driving the market up and pushing the yields to the floor. Right now, the Treasury bills are yielding 0.05% after bottoming earlier this month at roughly 0.01%. That means three-month T-bills with a face value of $1 million bought Friday would earn an investor just over $120 at maturity. It hardly seems worth the effort, but new regulations are making it harder for some investors to go elsewhere in search of higher yields. They are battling over a dwindling supply of Treasury bills, due in part to the U.S.Treasury's effort to keep the U.S. government's debt under the legal ceiling, which Congress has so far refused to raise.... On the demand side, a rule change by the Federal Deposit Insurance Corp. has made banks less willing to make short-term borrowings using instruments known as repurchase agreements, or 'repos,' say market participants. Such short-term loans are important investments for money-market mutual funds. With less repo demand from banks, money funds are moving more cash to Treasurys, further increasing demand for short-term U.S. debt. Meanwhile, money-market funds are adjusting to an earlier wave of regulatory changes aimed at bolstering their safety. New money-fund regulations issued by the Securities and Exchange Commission last year require funds to hold a greater percentage of more-liquid, high-quality assets—typically short-term Treasurys."
