This seems... odd. I don't really understand the way auctions work vs the wider market to understand if this is just a fluke in the selling process, but I wonder if someone somewhere is panicing about something and getting into short term debt?
There would be no real advantage to this short term debt at %0, even if you're panicking, because you're trading dollars for dollars. EG if you're panicking about the value of the dollar, buying treasury with those dollars that only returns the same number of dollars is no advantage.
What this does indicate is that the fed is buying treasuries directly to keep interest rates low. They don't care about return, but are simply going to provide enough demand to keep all treasuries the government wants to issue snapped up... so interest rates don't rise.
I doubt they meant to hit %0, and probably just over bought a bit.
There certainly is an advantage if you're worried about the stability of the financial system. Banks can fail, corporations can fail, if the US government fails to repay then things are probably so bad you're probably already dead...
If you're worried about getting repaid or you're desperate to get your cash out of whatever it's currently in and into something safe and liquid then short term treasuries are probably your answer. But like I said I don't know if that applies to auctions like this, auctions are not the same as the general market so it may just be a fluke.
>There would be no real advantage to this short term debt at %0, even if you're panicking,
There is an advantage to 0% short term debt vs cash. If you have a lot of park somewhere you can't simply put it in a savings account. FDIC protection only goes so far if your bank of choice goes belly up. So what are your choices? Well you can buy commercial paper for a while but after certain amounts that market dries up too (because there simply isn't enough of high quality commercial issuers). Treasuries are available in gargantuan quantities, are highly liquid, and assumed to be risk free.
>What this does indicate is that the fed is buying treasuries directly to keep interest rates low.
That's not really true these days. There was some of this going on up to the last round of quantitative easing but since then the levels held really steady:
https://research.stlouisfed.org/fred2/series/TREAST
The fed really isn't a big player on UST auctions these days.
If the US Treasury were to default, how likely would the FDIC to default as well? After all, part of their funds is itself in the form of Treasury securities.
> What this does indicate is that the fed is buying treasuries directly to keep interest rates low.
Given that the fed claims that QE is over (no more purchases, and existing bonds being retired when they mature), I'd like to hear any evidence that you have that shows that the fed is still buying. (And, in case you were going to go there, "because the interest rate is zero, duh!" is not evidence.)
