Treasury bill yields turn negative in sign of investor fear
US Treasury bill yields dipped below zero while longer-dated government debt yields rose on Wednesday in a sign of frightened investors flocking to more easily traded securities during the global market tumult.
“What you are seeing today is an example of a flight-to-safety on a massive scale,” said Kathy Jones, chief fixed-income strategist at Charles Schwab.
Ms Jones said Treasury bills — US government debt maturing in one year or less — are seen as more like cash because they are easier to trade than their longer-dated counterparts. She added: “People are desperate for cash.”
The yield on the one-month Treasury bill maturing in April slipped to minus 0.003 per cent. The yield on a note maturing in May fell to minus 0.020 per cent. Yields move higher when prices fall.
Meanwhile, the benchmark 10-year US Treasury bond sold off sharply, sending its yield up 10 basis points to 1.16 per cent. The yield on the 30-year bond rose 8bp to 1.76 per cent.
The rally in Treasury bills came as equity markets fell around the world, with the benchmark S&P 500 index of US stocks dropping 5.2 per cent.
Markets were roiled as economists dramatically revised down their growth expectations in recognition of the impact of the coronavirus pandemic.
Bruce Kasman, head of economic research at JPMorgan, predicted that US gross domestic product on an annualised basis would fall 4 per cent in the first quarter and 14 per cent in the second quarter.
In Europe, he forecast a 15 per cent contraction in real GDP in the first quarter, followed by a 22 per cent plunge in the next quarter. He said these would be “the biggest quarterly contractions recorded over the past 50 years at least”.
Ms Jones said she expected the rush for cash would continue. “As everyone starts to sell to meet redemptions or margin calls, they need more cash to put up, so then they have to sell something and put up more and more cash,” she said.
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