I was shocked to read a recent article in the USA TODAY titled: Rush to Earn Nothing
The 4-week US Treasury Bills recorded their lowest auction rate in history at 0%. Investors were willing to let the US Government borrow their money for four weeks for no return. There are several implications of this: We have to think this through logically. Investors make their investment decisions based on their risk vs. return criteria. US T-bill investors are specifically seeking low risk options for their money. Instead of earning some interest over the next four weeks, these investors accepted a zero percent return.
First, they must continue to have great confidence in the US government’s ability to repay their principal investment.
Second, they must feel like there will be no inflation over the next four weeks. One dollar today will still be one dollar in four weeks. Both of these reasons are good signs for our struggling economy, but we still have a long way to go.
