Wednesday, 10 December 2008

US T-bills now have negative interest rates

If you want to lend the US government some money you'll have to pay them for the privilege. Yes, the 3-month Treasury bill rate has dipped to -0.01 percent.

This isn't quite as mad as it seems. If you need a safe haven for a few billion US dollars you can't improve on Uncle Sam; he's got the printing press and can make new dollars if he runs out. Holding cash costs money for security; bank deposits have a return but with banks dropping like flies there's a risk of not getting your money back (above the $100K FDIC compensation limit) so paying the US government to hold your cash is actually sensible if you're totally risk averse.

Meanwhile the ten-year bills are a better deal; the interest rate is a big fat zero.


Edit: I'm told the FDIC insurance limit is now $250,000. The limit will return to $100,000 on the 1st Jan, 2010, except for certain types of account. (More)

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