Treasurys up after first auction with negative yield

[Roland99]

Source: MarketWatch

Treasury prices rose on Monday, pushing yields down, after a combination of small signals in recent days left bond investors wondering whether the Federal Reserve will buy even more debt that previously predicted.

Bonds stayed higher after the government received solid demand for its first auction of the week: inflation-indexed debt that came at a negative yield for the first time ever.

...

The Treasury Department sold $10 billion in 5-year Treasury Inflation Protected Securities at a yield of negative 0.55%, the first time the yield on the maturity has come in below zero.

TIPS pay investors a coupon — that’s -0.55% in this case — plus the rate of inflation as measured by the government’s consumer price index.

Read more: http://www.marketwatch.com/story/treasurys-rise-before-tips-sale-housing-data-2010-10-25

[List left]

1. please explain what this means

please explain what this means for those of us who are economic jargon challenged.

[Roland99]

2. Try this one.....

http://www.businessinsider.com/negative-tips-auction-2010-10

[SarahB]

5. It means that investors are so frightened

that they're willing to put money into treasuries even at a loss, because it's the only safe haven they know of.

It's sign #5,000,002 that things are much, much worse than they seem.

[happyslug]

6. investors are PAYING the US Government to hold their money

On a $10,000 loan the Federal Government will pay the investors $9999.945 at the end of one year (Ignoring the inflation rare which may be .55%, if we add the inflation rate to the interest rare it comes to 0%, so the Treasury may be looking at $10000 loan repaid in one year by just paying the debt holder $10,000).

[List left]

7. Thanks for a very clear explanation. nt

[TheWatcher]

8. Oh, but it's all Good, Good, Good.

As long as the Stock Market keeps going up, all of this is just crazy Glen Beck type crazy kooky meme stuff that should be ignored by better informed minds.

Get with the program.

Everything is wonderful.

:sarcasm:

[trud]

3. today's tip :-)

I suggest anyone looking for a safe place to put their cash savings, such as they are, take a look at their local credit unions. The ones in my area are paying near 3% on 5 year CDs. If you have to take out money before then, the (usual) six months interest penalty is sufficiently small that these still beat short term CDs. Be sure they're federally insured. My free financial tip for the day :-)

signed,

Someone furious that the stupid Fed is still keeping interest rates in the cellar, in the misguided hope that that will cause BigBusiness to borrow money and hire more people when all it does is clobber Seniors and others with their savings in CDs.

[SarahB]

4. Sorry, wrong place. nt