0% yield on Treasury Bills
by Thomas Mullooly
It was reported this week that the Treasury Department sold $32 billion in T-bills at a yield of 0%. Yes, that's NOT a misprint: zero perecnt yield. These are treasury bills which mature in four weeks. Yields on these kind of investments have dropped from 1.75% this summer to zero in December 2008.
Clearly, investors are more concerned about return OF principal then return ON principal. Another important point to keep in mind is many money market mutual funds invest in short-term treasury bills as the primary component for their investment portfolio.
If the current average rate on Treasury Bills is now 0%… what kind of rate should you expect to receive on money market funds over the next few months?
This is just another reminder that money markets are an unusual investment. They've been a terrific place to hide for most of 2008. But most of the time they are not — and should not be — considered an investment. Most times, money market mutual funds are merely short-term parking places while you are in between other investments.
Related posts:
- Look at the Bond Market
- Auction Rate Preferred: the bail-out
- Auction Rate Preferred Securities: a failure to disclose
- Nationalizing banks: why this will work
- Fed Rate Cut
Tagged as:
money market funds,
money market mutual funds,
T bills,
treasury bills,
treasury department
