Skip to comments.U.S. sells debt with a negative yield for 1st time
Posted on 10/25/2010 2:17:47 PM PDT by atomic_dog
The U.S. Treasury Department on Monday sold securities that fetched a negative yield for the first time, implying investors are willing to pay the government to own its debt.
(Excerpt) Read more at reuters.com ...
Mod. Please delete. I searched on the word negative in the title and nothing showed up but yet it is a dupe. Sorry
That sorry state of affairs cannot possible last.
People invest in any instrument to make money. Not lose it. Sure, a few people will do a little of this to get the capital loss tax write off, but that'll be small potatoes.
It’s Bush’s fault!!!
What kind of idiot buys a security that is already losing money?
I have some things I would like to sell.
You mean deflation? The only reason why you'd pay $102 so that you can get paid back $100 later is because you expect those future dollars to be worth more than they are today, and you have nowhere else to park your $100 safely.
Just had a thought: The FED?
Beat me to it.
Horse puckey. These bonds were bought at a price that would make thier yeild negative at today’s inflation rate. The people that bought them expect inflation and expect to make money from owning them relative to other investments. It does show that they are willing to take a slight loss relative to inflation to find an inflation protected investment (I think they can’t make up for the -.55% even if inflation screams upward — they’ll always be a little behind inflation).
Fabulous, we get significant deflation when the Fed is gambling on inflation if the Fed is, indeed, buying Treasuries..ooops....
Inflation? Sounds one hell of a lot worse. This is pure insanity.
An idiot who sees inflation coming. These are inflation indexed securities.
Boy I bet these sell like hotcakes!
Hollyweird liberals line up!!
People aren't buying those bonds, the TBTF banks are. It safer, easier and less risky than lending money to businesses or individuals. After the elections the Fed will kick in QE2 and the TBTF banks will dump their trash at the Fed window and buy more bonds. At some points it explodes and there will hyperinflation the likes of which Weimar never saw. Don't be caught without a chair when this music stops.
By the way, I don’t know if you noticed, but I think I was wrong above. If the inflation rate heats up people will probably pay a premium in the after market for these bonds, so the -.55% would be made up in an inflationary environment and the buyers of the bonds could do better in return than the official inflation rate.
The problem with these inflation protected bonds is that the seller declares what the inflation rate is. Right now they’re saying 1% but by all other yardsticks it’s around 10%. Lots of room for hanky panky there.
I agree atomic_dog. Lots of posts in the last year have pointed out the problems with the government’s calculation of inflation rate. Substitution among them (oh lettuce went up in price so people will buy cabbage . . . presto no inflation . . . American cars up in price . . . betcha they’ll buy Chinese). I think that it’s so perverse that a rise in price can lead to a reduction in inflation in the correct circumstances.