Wednesday, December 10, 2008

Interest rate on US T-bills turns negative

Interest rate on US T-bills turns negative

By Michael Mackenzie in New York
Tuesday Dec 9 2008 18:30
Nervous investors on Tuesday paid for the privilege of owning US government debt, pushing interest rates on three-month Treasury bills to negative levels for the first time in postwar history.

The implied yield for three-month bills briefly traded at negative 0.01 per cent - the first time that has happened since 1940, traders said. At such a level, an investor is essentially paying someone to own the security.

The flight to safety helped the Treasury sell $30bn in four-week bills at a discount rate of zero per cent for the first time. That auction followed the sale of $27bn in three-month bills at a discount rate of 0.005 per cent on Monday.

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