Short-Term Yields Go NEGATIVE in Scramble for Cash

(Wall Street Journal) Yields on the safest, short-term Treasurys settled into negative territory for the first time in more than four years, as investors continued clamoring for cash and safe dollar assets even as some markets showed signs of normalization.

The one-month Treasury bill yield closed at minus 0.041% Wednesday and the three-month ended at minus 0.046%, the first time they have closed the day below 0% since late 2015, according to Tradeweb. Yields sank further Thursday with the yield on the three-month Treasury at minus 0.048%.

“People are desperate for cash-like equivalents,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “The safest thing you can get is Treasurys.”

Buying a bond with a negative yield means investors will receive less money back when the debt matures, upending a basic relationship that has ruled financial markets for centuries.

Negative yields on bonds have become commonplace in Europe and Japan, where central banks have used negative policy rates to spur growth. However, the Federal Reserve has all but ruled out using negative rates. Short-term Treasury yields briefly went negative in Sept. 2015, when the U.S. central bank put off a rate increase after an economic slowdown in China shook global markets.

“I don’t think we can go much lower,” said Gennadiy Goldberg, U.S. rates strategist at TD Securities. “For yields to go lower would imply the Fed would cut rates which the Fed doesn’t want to do.”

Mr. Goldberg said he expects yields to rise as the Treasury will have to raise money to finance fiscal stimulus measures to combat coronavirus.

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