Tuesday, December 9, 2008

Almost-zero interest rate

NPR had a piece saying that interest rate on Treasury four-week bills was zero percent. I checked the Treasury website to see what numbers they gave. They did not say zero; they said the interest rate was .01%, which is lower than the last time I mentioned interest rates.

At the end of November, the one-month T-bill rate was .02%, the three-month rate was .01%, and the two-year rate was 1%. So far in December, the lowest rate for the one month bill has been .01% on 12-04-08 and 12-08-08. The lowest rate on the three-month bill has been .02% from 12-03 until 12-05. The lowest rate on the one-year was .49% on 12-09 and on the the two year, .82% on 12-04. The three-year rate has not yet dropped below 1%, but it got to 1.02% on 12-04-08.

These rates are astonishing and astounding. I get better rates on my checking account that these short-term rates. Why don't people just hold cash? They probably do, but the large institutions cannot do that as easily. For them, the short-term treasury debt is cash. These rates speak volumes about trust and confidence.

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