When Congress engages in deficit spending the Treasury auctions off T-Bills to pay for it.
T-Bills are purchased by Depository Institutions, who pay for them with Excess Reserves, or Vault Cash.
Despite this view, Buffett tends to keep a lot of cash and T-bills on hand.
Whatever you make of this uncertainty, negative rates on T-bills seem a likely future circumstance.
Currently, the Treasury yield curve ranges from 0.11% for 3-month T-bills, to 2.85% for 30-year T-bonds.
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This is because the bank reserves that the Fed creates are considered money, rather than T-bills.
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This is the logical explanation for the negative interest rates on 90-day T-bills that have been seen recently.
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The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979.
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T-bills yield a negative real rate of return now and 10-year Treasuries yielding 4% don't light my fire.
T-Bills, gold, foreign stocks and domestic stocks all produced a positive real return in two of the three periods.
Reitlinger's work suggested art as an asset class was an underperformer, maybe the equivalent of T-bills over two centuries.
Many legit money managers sold Bernie-like low-volatility constructs to investors, promising a rate of return at least twice T-Bills.
With T-Bills yielding next to nothing, this is no longer an enticing prospect.
Now, imagine that the Treasury started selling one-day T-bills that yielded 0.25% interest.
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T-bills that mature in a year or less are paying 0.5% (annualized).
Typically, the study assumes a plan mix of 60% stocks, 15% long-term corporates, 20% long-term Treasuries, and 5% 3-month T-Bills.
Other people are of course free to purchase T-Bills and a few financial players do have their reasons for doing so.
Against this backdrop, Spanish bond yields fell on a day that the country sold 12- and 18-month T-bills, Meger pointed out.
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Since the Fed started paying IOR, the IOR interest rate has continuously been higher than the market interest rate on 90-day T-bills.
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So, when the interest rate on 90-day T-bills is below the IOR rate, for practical purposes we have an inverted yield curve.
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This trend reached a crescendo during the crisis of 2008, when 10-year Treasury yields plunged to 2% and 90-day T-bills paid negative yields.
Under these circumstances, the favored buyers would take all of these special T-bills that they could get, and they would never resell them.
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Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors.
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And, during the Kennedy Administration, the Fed sold T-bills and purchased an equal amount of longer dated T-Notes in order to reduce long-term rates.
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Money market funds and cash equivalents (short-term certificates of deposit, T-bills) will yield below 1.0 percent for several more years, thereby generating a negative real return.
In a sense, these expected returns reflect what the market is estimating will be a fair payment for each asset class over T-bills over the long-term.
This week the Treasury Secretary has been traveling to China to assure America's leading creditor that it should keep buying American T-bills because, well, because .
However, given the cycle of funds from the left pocket of the U.S. government the Fed to the right pocket the Treasury selling T-bills is the risk-free rate really risk-free?
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The US government has then traded a fixed rate of 0.57 for a bet on the variable rate of US T-Bills over the the next 10 years.
As it piled up dollar reserves, China didn't invest them at home but sent them back to the U.S. to purchase T-bills and Fannie Mae mortgage-backed securities.
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