WSJ: T-Bills Yields at Zero
The Wall Street Journal published a piece, "Yield of Zero? There's Record Demand for That." It says, "Amid fresh worries about the global economy, a $15 billion sale of U.S. government debt attracted record demand on Tuesday -- even though the securities, which will mature in a month, were sold with a yield of zero. The auction drew $9.47 bids for each dollar offered, surpassing the previous high from a December 2011 T-bill sale. Investors handed out free cash to the U.S. Treasury in exchange for a place to preserve capital. It was the third time from the past four sales with a zero auctioned yield. The result underscores the strong appeal of highly-liquid U.S. government debt, among the safest in the world amid growing anxiety over the global growth outlook and the timing of the Federal Reserve's first interest-rate increase since 2006. On Tuesday, investors flocked into assets seen as relatively safe -- Treasury bonds, German bunds and U.K. gilts -- as stocks, oil and emerging-market currencies sold off. "There is a lot of fear in the financial markets," said Jim Caron, global fixed income portfolio manager at Morgan Stanley Investment Management, which had $403 billion assets under management at the end of June. "The Fed is concerned about global growth, so investors should be concerned <b:>`_." It continues, "Demand for T-bills usually rises as the end of a quarter approaches.... Adding to demand for bills: the Treasury has been selling fewer of them lately as it has hit its "debt ceiling," and is waiting for the U.S. Congress to raise the cap later this year. Tuesday's four-week bill auction was $5 billion smaller than a week ago and the smallest since Feb 2014. "Treasury will have to continue to keep the sizes of the 4-week bills low over the next few weeks because of limited headroom under the debt limit," said Thomas Simons, money-market economist at Jefferies. In the meantime, demand remains robust from money-market funds which are mandated to invest in very short-term debt instruments. Tighter regulations are pushing many money market funds investing in short-term corporate debt instruments such as commercial paper into buying safer T-bills. Analysts said such demand is going to continue to keep yields on T-bills at very depressed levels even as the Fed appears to be close to raising short-term interest rates for the first time since 2006.... Tom Sontag, a money manager in Chicago at Neuberger Berman Group LLC which has $251 billion assets under management, said this dynamic means yields on T-bills could "decouple" from the Fed's rate-increase campaign. Mr. Sontag said he doesn't expect bill yields to rise a lot because higher yields would attract fresh buying interest, keeping a lid on the yields."
