More free money for the government and return-free risk for bond investors. Here are the details on the $27 billion just raised by the Treasury:
Bloomberg: The Treasury sold $27 billion in three-month bills at the lowest rate since it starting auctioning the securities in 1929 amid record demand for the safety of U.S. debt during the worst financial crisis since the Great Depression.
The bills were sold at a high discount rate of 0.005 per cent, the Treasury said today in Washington. At last week’s auction, the bills drew a rate of 0.05 per cent. The government received bids for the bills totaling more than triple the amount sold.
Seriously, as long as the government can raise virtually free money, why stop at lowering rates to 4.5%. If that’ll boost home values — and the government can ostensibly make money from the spread — then why not lower rates to 3.5%! Or 2.5%!
Just as long as China and everyone else are willing to settle for zero return — and in a negative return environment, why shouldn’t they? — this is one hell of a trade.