The coronavirus crisis has brought another first to U.S. financial markets — negative yields on government debt.
Yields on both the one-month and three-month Treasury bills dipped below zero Wednesday, a week and a half after the Federal Reserve cuts its benchmark rate to near-zero and as investors have flocked to the safety of fixed income amid general market turmoil.
It was the first time that happened in 4½ years, when both bills briefly flashed red and yields fell to minus-0.002% each. The readings Wednesday were well below those.
“This is part and parcel of the whole flight to quality thing,” said Kim Rupert, managing director of global fixed income at Action Economics. “They’re obviously the most liquid instrument. We saw a lot of selling pressure a few days ago when everyone was selling everything to get cash. But with all the plans the Fed has introduced, the bill market is much safer.”
The U.S. now joins large swaths of Europe and Japan that also have negative-yielding debt.
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