Zirpmeister Bennies

Treasury Sells Three-Month Bills at the Lowest Rate Since 1929
By Michael J. Moore and Liz Capo McCormick

Dec. 8 (Bloomberg) -- The Treasury sold $27 billion in three-month bills at the lowest rate since it starting auctioning the securities in 1929 amid record demand for the safety of U.S. debt during the worst financial crisis since the Great Depression.

The bills were sold at a high discount rate of 0.005 percent, the Treasury said today in Washington. At last week’s auction, the bills drew a rate of 0.05 percent. The government received bids for the bills totaling more than triple the amount sold.

“It’s all about capital preservation,” said John Canavan, a fixed-income analyst in Princeton, New Jersey, at Stone & McCarthy Research Associates. “People are afraid to put their money anywhere else so they aren’t terribly concerned about returns.”

The Treasury also sold $27 billion in six-month bills at a high discount rate of 0.30 percent, the lowest since at least 1958. At last week’s auction, the six-month bills drew a rate of 0.43 percent.

The rate on three-month bills peaked at 16.75 percent in May 1981, according to Federal Reserve data. Today’s rate was the lowest since the government began issuing the three-month bills in 1929, according to Stephen Meyerhardt, a spokesman for the Bureau of Public Debt in Washington.

“There are also deflation concerns,” Canavan said. “Although we are at a near-zero yield, if you are expecting a deflationary environment over the next few months, then the real return is a little bit better.”