Treasury Bill Yields Collapse

by: Toro

I found the graph below quite astonishing.

I'm not a money market guy, but reasons I have heard for treasury bills' precipitous drop include:

  • The Fed calling off a $5 billion auction, leading to less supply and higher prices and thus lower yields
  • Banks investing excess reserves in cash rather than in the fed funds market
  • Concerns about the commercial paper and money markets, pushing risk-averse investors into the relative safety of Treasury paper
  • The first reason is stimulative, the second and third reasons are evidence of risk avoidance. Equities today and last Friday are viewing the move as stimulative. I think ultimately, the stock market will change its opinion to one of risk avoidance.