Why Is The US Short-Term Treasury Debt "Sweet Potato"?

In the past few weeks, some investors are willing to buy short-term treasury bonds at a weak yield in the two tier market.

If the investor buys us treasury bonds at a negative rate of return, when the bonds mature, the investor will suffer a small loss; if the investor can sell US Treasury bonds at a lower negative rate, he will profit from it.

Over the past few months, yields on 2 - year treasury bonds in Germany, France and Finland have been negative.

On Wednesday, even the yield of Swiss bonds, which expired on 2027, fell to a negative value.

This phenomenon is rare before the current financial crisis.

But now it is becoming a new normal, because the next wave of monetary easing has failed to stimulate the global sluggish economy.

The US Treasury has been cutting short supply of US Treasury bonds to facilitate the issuance of medium and long term treasury bonds at low interest rates.

In May, the US Treasury said it plans to increase supply to provide more liquidity to the Treasury market.

But the US will hit the debt ceiling later this year, prompting the Treasury to reduce the supply of treasury bonds.

Investors are spending a lot of money.

In the hands of the federal government.

Since the financial crisis, the number of US Treasury bonds issued at zero interest rates has exceeded $1 trillion this summer. This scale continues to rise this week. The 3 month treasury bonds sold on Tuesday and the 1 month treasury bonds sold on Wednesday are winning zero returns.

Jie Furui, Jefferies LLC, vice president of fixed income, and Thomas Simons, a money market economist, says this is totally unbelievable, but that's the case right now. (LLC)

The duration of US Treasury bonds ranges from a few weeks to a year.

By issuing

The US government can meet its short-term funding needs.

Treasury bonds, such as corporate bonds, used US Treasury bonds as a safe place to store short-term funds. In addition, more stringent regulations were imposed after the financial crisis, which also boosted the demand for money market funds and banks for short-term treasury bonds.

This year, investors have been fighting for a shrinking Treasury pool.

According to the Ministry of finance, as of the end of September, the scale of the outstanding short-term treasury bonds fell to $1 trillion and 360 billion, which was $1 trillion and 457 billion at the end of 2014, and this year is expected to hit the lowest level since 2007.

The imbalances in supply and demand have made the Treasury strongly kill prices when issuing bonds.

According to Andrew Hollenhorst, a short-term interest rate strategist at Citigroup Global Markets Inc., since September 2008, there have been 46 short-term bond auction auctions in the us with zero interest rates and a total of 1 trillion and 170 billion US dollars in short-term treasury bonds that do not pay interest in Khost.

Short term treasury bonds that do not pay interest account for only 3% of the supply of short-term treasury bonds over the same period ($40 trillion and 400 billion).

However, the trillions of dollars on this scale show a long-term low.

The distortion and the pressure on depositors brought almost no benefit to depositors' deposits.

Investors are increasingly skeptical about whether the Federal Reserve Board can raise short-term interest rates this year because inflation is relatively low and the momentum of economic growth is not strong enough.

Retail sales and inflation figures released on Wednesday showed a general trend, leading to a benchmark 10 year treasury bond yield falling below 2%.

The yield on 10 - year treasury bonds fell from 1.982% on Tuesday to 1.982%, the lowest closing level in April 28th.

Hazel Man (Guy Haselmann), head of US interest rate policy at Bank of Nova Scotia in New York, said the decline was due to a slowdown in economic growth and inflation, and that the Fed's policies were not effective enough to deal with these problems.

In the auction held on Tuesday, the winning rate of the 3 month short term treasury bonds was zero, which happened only once in the past.

On Wednesday's auction, the winning rate of the 1 month US Treasury bonds was zero. This is the seventh time in a row. The 5 billion dollar auction is the smallest since the US Treasury launched the 1 month Treasury note in 2001.

Jacob Lew, the US Treasury Secretary, said earlier in October that there would be only 30 billion dollars in cash left by the US government by November 5th or a few days ago. He appealed to the US Congress to raise the borrowing limit of the federal government immediately, so as to avoid any confusion in the market and the threat of the credit rating of the United States in October.

Investors said that if the US Treasury increased the money supply after the debt ceiling problem was resolved, the yield of short-term treasury bonds would go up.

The Fed is currently considering the increase in short-term interest rates, another factor contributing to the rise in short-term Treasury yields.

But few people think that yields on short-term bonds will rise sharply.

Many investors who hold short-term debt will have to work hard to deal with the extremely small yield of treasury bonds from a historical level.

Kam Poon, the portfolio manager of Aberdeen Asset Management, which is responsible for short-term debt instruments, said that the return rate of depositors will remain below the historical average, and the return rate is expected to go further down.

The group manages assets of $483 billion 300 million.