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3-Month Treasury Bill Yields Turn Negative

November 19, 2009

This is not a good sign. The last time this happened was last year right around the Lehman blow up. The fact that yields are negative on the 3-month bills indicates that investors are staying on the sideline. Which raises the question of why (and how) equities have rallied so much if the money is staying out of the market. The durability of the rally really is questionable. Either there is massive liquidity or massive mystery which brings us back to Meredith Whitney’s interview on CNBC where she seemed to have a hard time grasping what exactly was going on with the markets.

U.S. stocks extended a global drop as concern grew that the rally has outpaced the prospects for economic growth. The yen and the dollar strengthened, oil tumbled and yields on Treasury three-month bills turned negative for the first time since financial markets froze last year.

[via Bloomberg]

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Joshua November 20, 2009

oh dammit – i made the comment on the last post. 13 week net domestic out flow. foreigners are exchanging for a free 20% equity boost and playing our markets. as goldman said (and zerohedge reported) – the blowup could happen in 3 days or 3 months. get ready.

Square Feet November 20, 2009

CalculatedRisk had a post about the negative yield being not that big of a deal and it be related to end of the year nonsense. Call me skeptical, but ANYTIME yields go negative and you have to pay for the right to keep money is a symptom of a bigger problem.

Joshua November 20, 2009

i agree. supply/demand is way out of balance. domestic equity has to see the equity bubble as ripe to pop and are scrambling for any treasury they can get in preparation for when this holiday season sucks and congress/people continue to turn on the government. its a good time to short SPY, i think. but hey, things could keep going up. nothing makes sense anymore anyway.

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