Across the Curve details investors PAID THE GOVERNMENT TO BORROW FROM THEM, again investors PAID THE GOVERNMENT TO BORROW FROM THEM. New Econompic equation:
That's right. You lend the government $1000.10 and 3 months later they will pay you back $1000. Why?
the money raised by financial institutions via the FDIC bonds is exacerbating the situation. The borrowers do not need that money now. They are defeasing maturities which will arise in 2009. So that money will sit in the short market until it is needed next year.
In the bill market one has to venture out to the three month bill before he can locate a positive yield and at the moment that yield is just a meager single basis point. The three month bill has traded with a yield of negative one basis point, too.
When will the madness end?