Bloomberg News

Treasury 4-Week Bill Rates Negative for First Time Since 2010

June 27, 2011

June 27 (Bloomberg) -- Treasury four-week bills traded negative for the first time since January 2010 on quarter-end buying amid a shrinking supply of the securities.

The one-month rate on the bill reached negative 0.0051 percent today, according to Bloomberg Bond Trader prices. The rate is down from as high as 0.1562 percent this year on Jan. 10. The average rate is about 1.8 percent over the past decade.

Negative bill rates mean investors are willing to pay the government to hold their money, protecting them from the potential losses of other investments. Investors such as banks and securities firms are often attracted to the safest maturities at quarter-end to improve the quality of assets on their balance sheets.

“Short-term Treasury bill rates are falling due to the normal quarter-end demand for the securities,” said Thomas Simons, a government-debt economist in New York at Jefferies Group Inc., one of the 20 primary dealers that trade directly with the Federal Reserve. “There is already a limited supply of bills and the pick-up in demand ahead of the end of the quarter is pushing rates lower.”

Bill rates have traded close to record lows as the Treasury has reduced sales to conserve borrowing as the U.S. grapples with increasing the federal debt limit.

The Fed has kept its target rate for overnight loans locked at zero to 0.25 percent since December 2008, driving down short- term rates to record lows. Four-week bill rates reached a record negative 0.09 percent on Dec. 4, 2008.

--Editors: Dave Liedtka, Dennis Fitzgerald

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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