Market Panic Pushes Treasuries Even Higher


Two huge stories, the Bernie Madoff indictment and the collapse of the auto bailout, are fueling the panic this morning. In addition to sharp stock declines, treasuries, which are already in nosebleed territory, are getting heavy bids once again:

Bloomberg: Treasuries rallied, sending yields to record lows, as investors sold stocks across the world and fled to the safety of government bonds after the U.S. Senate rejected a bailout of the nation’s automakers.

Yields on 10-year notes fell to 2.48 per cent, the lowest level since 1954, as the Senate vote on a $14 billion emergency funding plan for General Motors Corp. and Chrysler LLC fell short of the 60 required. Three-month bill yields, which fell below zero per cent this week for the first time, were at 0.01 per cent before a government report that may show deflation. Futures showed 100 per cent odds the Federal Reserve will cut interest rates at least 50 basis points next week.

Learning about gigantic Ponzi schemes lurking in unexpected places in the economy can make return-free government debt look pretty nice.