Barron's Hits Negative Yields Again
Barron's writes, "Short-Term Treasury Yields Could Go Negative. Here’s What That Means for Investors." The article tells us, "The steady rise in long-term Treasury yields has attracted plenty of investor attention. But short-term bills are starting to draw focus for the opposite reason: Some could fall below zero in coming weeks if policy makers don't act. Yields on some Treasury bills -- short-term securities that mature in a year or less -- could temporarily turn negative because of a coming supply crunch, experts say. While they won't be auctioned by the U.S. at rates below zero, as auction rules prevent that, bills could trade at negative yields in secondary markets." Barron's continues, "Still, while any negative rates would be the result of technical and likely temporary market pressures, they highlight how difficult it is for investors to earn returns in fixed-income markets. What's more, many investors are exposed to potential negative rates through money-market fund holdings that are still near record levels." They quote Northern Trust Asset Management's Peter Yi, "We expect these continuous [bill] paydowns to happen really until the middle of this year.... The magnitude of this paydown is really extreme." The piece adds, "Yi, of Northern Trust Asset Management, also believes that the Fed will take action to boost short-term rates if they fall below zero. 'This technical adjustment could be the tide that lifts all boats higher, and should even lift T-bill [yields] and prevent negative interest rates on those really short instruments.... That's just better for the market, in terms of its functioning.' But it isn't clear when either of those steps will occur. So until then, investors may want to be even more wary of cash than usual."
