US Treasury Bonds sold at -0.005% interest
h/t CR
Yes, to lend the US Treasury $1000 for three months, you would have to pay them.
About $0.01 for the term.
They sold $27 billion of these, which means financial institutions are paying the US government.
They are paying the US about a quarter of a million dollars if they would, please, not actually lose the money by march.
Cheaper than any other option. I infer.
Solves a lot of problems if they can convince people to keep it up for a few more quarters.
Since Treasury Rates never go up, just as Housing Prices never go down, the very large short term debt can be rolled over until just after Obama takes officeindefinitely.
No need to panic.
So, what do they know that we don't?
Seriously, this is a neat trick.
For some reason the US Treasury has taken a lot of the additional US debt in very short term bonds - out of the ~ $10 trillion debt, something like $3 trillion is short term and needs to be continuously rolled over.
At these negative interest rates the US Treasury would be paid about $100 million per year by short term bond buyers to take their money.
Sweet.
This, btw, suggests a lot of people think all large scale investment options are a losing proposition in the short term; that inflation will be negligible or negative in the short run; and, that holding "cash" has risk.
As it does.
For the next trick, figure out how to pay the bonds back if people decide giving the US government interest free trillion dollar loans is not a good idea.
I personally favour used $20 bills - the old all green ones of course.
Hand them out from the NY Fed.
Of course, as we all know, people carrying a lot of cash are suspect, and if significant traces of controlled substances like cocaine are found on large amounts of cash, it may be summarily confiscated.
Problem solved.
And the skim will refloat the Manhattan housing market.
The Nobel Laureate, he knows.
Finily!
LOL
PS: Iceland will lend you money at -0.0025%!
Twice as good.
Beat that!
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I suppose if you're expecting serious deflation, then a negative nominal interest rate could still be a positive real interest rate...
It's hard to wrap my mind around accepting a negative interest rate, but I'm guessing that its cheaper than finding a way to store massive amounts of green bills-- who knows what the risk of fire or theft could be?
At least, it's a great opportunity for the US to restructure its debt. Sell, sell, sell all this debt to idiot foreign banks, and use it to pay off all of our higher interest debt.
Pnut-the FDIC will only insure $250,000 of those green bills!
Entirely OT: dkos has an AP report that Steven Chu will be named secretary of energy. Yes, THAT Steven Chu.
Not only that, but home insurance will not insure cash in the house (I think they like 100% premiums for any significant cash on premises) - safe companies will guarantee surprising small amounts of cash for surprisingly high premiums - almost like they don't trust people.
I haven't see the list, but my impression is that the buyers of the ZIRP bonds are mostly US firms - some putting treasuries on their balance sheet for end of year reports, others parking cash, mostly federal bailout cash at that - this is short term capital preservation, companies sitting on cash that need to show capital assets and are terrified of losing the money if they put it into anything else.
Problem is that these are short term bonds - they have to be rolled over, and there are a lot of them; and eventually the buyers are going to want positive real interest.
Unless we go into a multi-year deflationary depression of course...
Chu would be a very interesting choice for DoE indeed.
He must be a good guy, he didn't have me towed when I accidentally took his space at LBL when I gave a talk there the other year... (they have a remarkably complex and nuanced colour code for the interior parking spaces).
good point about the lenders eventually wanting higher positive real interest
As a citizen and physicist, I'm beyond thrilled that the secretary of energy will be someone who understands conservation laws and Stefan-Boltzmann.
But I've been trying very hard not to comment on whether Chu is a "good guy". I knew grad students of his fifteen years ago; let's just say I hope he's mellowed in the meantime.