Short Term U.S. Treasury Yields Fall Crazily
August 20, 2007
In only five days the yield on the 1-month Treasury Bill has fallen from 4.18% to 2.47% as an enormous amount of money has poured into the very shortest U.S. Treasury terms available.
8/1/2007
1-month T-Bill - 5.05% yield
3-month T-Bill - 4.89% yield
6-month T-Bill - 4.96% yield
8/20/2007
1-month T-Bill - 2.47% yield
3-month T-Bill - 3.12% yield
6-month T-Bill - 4.17% yield
The continuation through this week of this rally in prices of short-term Treasuries may indicate that investors do not necessarily feel that the actions of the Federal Reserve are enough to calm the credit markets. Short-term government bond funds have seen good price appreciation in August, but now offer lower yields to new investors. Treasury buyers may play be playing a dangerous game by trying to outguess the direction of yields as prices jump crazily from day-to-day (the yield on the 1-month T-Bill fell 80 basis points today), but investors can be guaranteed that they are not alone in buying Treasuries because they are the safest investment on the planet.
