Post-Lehman Deja Vu As T-Bill Yields Turn Negative

[PurpleKoolAid]

Is something big about to happen?

From Zerohedge: The last time Bill yields turned negative (in essence investors paying the Government to hold their money for them) was in the days after the Lehman bankruptcy, when the entire world was about to blow up. So why did Bill yield for January maturity just turn negative once again?


http://www.zerohedge.com/article/post-lehman-deja-vu-t-bill-yields-turn-negative

[MeToo]

Wow, no replies to this yet? This seems like pretty big news. The comment by samsterns is very chilling. He is answering the question of why someone would buy a negative yielding T-Bill instead of just holding cash:

There is only one pluasible explanation for your question.  Those who purchase T-bills with known negative interest rates are afraid that the cash that is held by someone else might not survive in 3 or 4 months (i.e. the duration of the T bills in question).  Suppose that you are a money manager with hundreds of millions or billions of dollars sitting in cash.  Now think about exactly where that cash is currently residing.  It's either in a bank account or a primary dealers custodian account.  If there is even an inkling of a chance that they might fo under in the next 3 or 4 months then you are dead my friend.  The FDIC insurance is 250,000 and the SIPC only insures up to $5 million I believe for brokerage account.  If you buy a negative yielding T bill, then at least you know for sure that Uncle Sam will five you back the face value of your T bill even if the Fed has to print up the confetti.

Got it?  There is no ther explanation for taking a negative yield unless you are afraid of the people who are "holding" the cash for you.

-mt

[mousewizard]

This is scary big news. If you have cash in the bank beyond what you need for the next month, pull out the excess. You can always put it back later, but this kind of news is why I monitor this forum. Amidst all the flotsam and jetsam is the occasional lifesaving nugget. This is one of them. Looking at history, this kind of action always  precedes something really bad happening.

I was hoping they'd hold it together through the xmas season, but it's looking like the plates are starting to spin off the sticks.

[Bill Hicks]

This is scary big news. If you have cash in the bank beyond what you need for the next month, pull out the excess. You can always put it back later,

I give people that advice and they look at me like I've got three heads.   

[NYLongBow]

The comments on that page are quite the read.
:-(

[Six Gun Jim]

This is scary big news. If you have cash in the bank beyond what you need for the next month, pull out the excess. You can always put it back later,

I give people that advice and they look at me like I've got three heads.   

Or eight eyes, I hear you. I plan on laughing heartily when the banking system goes kerplunk in the shitter, even if they threaten to shoot me. 

[feelingweird]

Serious question. Is being in cash or cash equivilant a good prospect at this point?

I recently got out of all equities and turned my wife's retirement into 50% T bills and 50% Money market. Do you think this is a good decision in light of this article.

BTW this has the hairs on the back of my neck up. I am not that good with bonds and TBILLS and that part of the economic cycle. But this news has people REALLY nervous and that makes me nervous..

I would say this is BIG news and should be watched closely.

Robert

[Roberto Thorn]

IMHO, we're all gonna die - more than likely within the next fifty years or so - give or take five or ten years.  I don't even know why I continue on when I read things like this.  I think I'll head for the mentos and diet coke this weekend.

[mousewizard]

And so it begins for Roberto...

[cozdiver]

Serious question. Is being in cash or cash equivilant a good prospect at this point?

I recently got out of all equities and turned my wife's retirement into 50% T bills and 50% Money market. Do you think this is a good decision in light of this article.

BTW this has the hairs on the back of my neck up. I am not that good with bonds and TBILLS and that part of the economic cycle. But this news has people REALLY nervous and that makes me nervous..

I would say this is BIG news and should be watched closely.

Robert

THINK GOLD OR SILVER

[Annihilatrix]

I think this comment caught the innate mindfuckedness of all this:

by phaesed
on Thu, 11/19/2009 - 15:44
#136253

WOAH!!!!!!!!!!!!!!

 

This is what caused the Japanese sell off!

This is what caused our sell off!

This is the watershed signal events.... this destroys quant models

INTEREST CANNOT BE NEGATIVE..... When it becomes negative in real terms, forget about it. Somewhere, someone just went bankrupt!

The comments on that page are quite the read.
:-(

[pamplemousse]

Robert, one thing you might want to do is look very closely at what your wife's money market is invested in.  The one that is offered where I work is heavily invested in FNMA -- I foolishly expected it to be short term treasuries and high grade corporate paper.  For that reason, I decided not to go with the "ultra-safe" money market.  And mutual funds are out of the question for my risk profile.

On the plus side, the Thanksgiving grocery sales are on, and I'll be investing there shortly!

[FireJack]

What exactly is going to happen. Massive deflation? Inflation? Popping of the US government debt bubble? Freezing or collapse of credit markets?  What?

[Bill Hicks]

What exactly is going to happen. Massive deflation? Inflation? Popping of the US government debt bubble? Freezing or collapse of credit markets?  What?

WTF knows?  It's like being blindfolded on an endless rollercoaster with a track missing somewhere along the way.   

[nomore]

Could this have anything to do with Jamie Dimon's comments of last week?

This all smells off to me...