The Plunge In Short-Term Yields

Over the past few weeks, the yields for short-term Treasuries have plunged. The yields are basically near 0%. It’s one thing to have very low yields for 1-month T-bills, but now you’re not getting much for socking you’re money away from 12 months.

To give you an idea of how low interest rates are, if you lend Uncle Sam $1 million for one day at one basis point, you get about 28 cents for your troubles.

Check out the plunge in yields:

And don’t pin this on the Federal Reserve. Most of the QE2 buying has been in the middle of the yield curve.

Personally, I had been expecting the Fed to raise rates sooner than most people had expected. Apparently, Mr. Market disagrees and expects rates to stay low for a while longer.

Posted by Eddy Elfenbein on May 10th, 2011 at 10:03 pm

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