Closing Out 2009 In Style: Cash Management Bills Price At 0.000%
It is only fitting that one of the most schizophrenic years in recent capital markets history should close with a $5 million CMB auction pricing at 0.000%. And so the circle of chasing risky and risk-free assets with equal passion is now complete. Even as high yield bonds have returned over 50% YTD, investors can't get enough of parking cash in yield free US government-backed pieces of paper. Many have claimed this phenomenon is indicative merely of capital allocation ahead of January 1. Well, that is in a few hours. And with the next 4-week Bill/CMB auction likely to take place within a week, we will promptly see if this is indeed the case. If we end up with another 0.000% soon, then the structural problems at the near-end of the curve will end up being much worse than most have expected. That, and negative 1 month rates coming a-plenty.