T-Bill rates now negative, general collateral at 1 (ONE!) basis point (=0.01% interest). Negative interest rates mean that you are willing to pay someone to hold your money on the belief that you will get your money back less a storage fee. Capital is going into hiding at a frenetic pace. Negative short term rates also bring the risk of money market funds “breaking the buck.”
The phony economy-puffing effects of QE2 are scheduled to end Thursday, and the “flight to quality” is already well underway. The only thing that’s funny is the alleged definition of quality: anything issued by the U.S. Treasury. Given the fed dot gov’s fiscal profligacy, the economy-destroying policies of the Obummer administration, and the fact that our central bank has printed up more than $1.6 Trillion brand new dollars just to keep the banks and the government they own from closing…why anyone would consider the U.S. government to be a good credit risk is beyond belief. The only possible explanation is that the large status quo players are voting with their money to indicate their belief in, and support for, the status quo. Which, I guess when you think about it, isn’t really a surprise, is it?
At Zerohedge, the sarcasm meter is pegged high: [click on the link to view the charts]
- The schizophrenia is now complete.
Buy this window dressing, but that window dressing, buy insolvent currencies, buy New Jersey, buy T-Bills at negative rates. Just buy…. on margin if possible.
We’ve done this before, and it had the temporary effect of scaring money into Treasuries and furnishing the U.S. government with a large pool of insiders, sycophants, and fools willing to loan their money to “Uncle Sugar” and keep the wheels of government turning. Until the next iteration of QE is needed, that is. Is anyone seeing a pattern here?
Print money, loan to government.
Crash stock market, scare money into government loan (Treasuries) markets.
Print money, loan to government.
Crash stock market, scare money into government loan (Treasuries) markets.
Print money…
Update: General collateral rates now fractionally negative. And as Tyler Durden points out :
- We said: “this latest move has unpleasant implications for money market managers, who unable to find yield in repo (0.01%?) will now be forced to look for higher yielding assets, and thus expose them to even more contagion risk once the house of cards falls, facilitating the “breakage of the buck” once again just like what happened in the aftermath of the Lehman catastrophe, and snarling all global fund flows, forcing the Fed to become liquidity provider of last resort.” As of today, this prediction is well en route to being confirmed.