Why Does Anyone Buy These Things? …… Short Term Treasury Bonds!!!


On this blog, I often try to explain or show things which may not be obvious to others.  It’s what I love.  But, I’m not all knowing!  Sometimes, I run into things I can’t quite get my head around. 

In this case, it is that many people/entities by short term US bonds, by “short term”, I mean 3 and 6 month bonds.  I don’t know why anyone would!  Consider this article ….

Rates on US Treasury bills rise to highest point this year

WASHINGTON (AP) — Interest rates on short-term Treasury bills rose in Monday’s auction to the highest levels this year.

The Treasury Department auctioned $24 billion in three-month bills at a discount rate of 0.050 percent, up from 0.030 percent last week. Another $24 billion in six-month bills was auctioned at a discount rate of 0.145 percent, up from 0.135 percent last week.

The three-month rate was the highest since three-month bills averaged 0.055 percent on Dec. 22. The six-month rate was the highest since these bills averaged 0.155 percent, also on Dec. 22 of last year.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,998.74, while a six-month bill sold for $9,992.67. That would equal an annualized rate of 0.051 percent for the three-month bills and 0.148 percent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, rose to 0.33 percent last week from 0.28 percent the previous week.

I simply don’t understand this.  It’s not sane.  Not only is inflation kicking it’s azz, it isn’t worth the time, not as an individual, not as a company, nor some other central bank.  I presume companies and central banks have to pay someone to do such transactions. 

Sure, there’s the exchange rate game (Mrs. Suyts thought that to be an explanation), but, that’s awful risky.  And, besides, people have been buying them long before the rise of the US Dollar vs other currencies. 

So, why does this happen?

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6 Responses to Why Does Anyone Buy These Things? …… Short Term Treasury Bonds!!!

  1. EW3 says:

    It’s a good place to store money in case the economy tanks.

    • suyts says:

      For 3 months? That’s not a hedge against a tanking economy. And couldn’t one buy a similarly safe bond which pays much better interest rates?

      • EW3 says:

        3 months is a reasonably short time frame to keep your money tied up. Provides flexibility.

        Take 1/3 of your money and put it in 3 month bonds, 1/3 a month later and the last 1/3 a month after that. This way every month you can take advantage of a change in the investment climate or just roll it over in more 3 month bonds.

        The people and corporations that do this care less about interest and more about stability.

      • EW3 says:

        I should add, if you have 100 million, do you really care about interest rates?
        You just don’t want to get wiped out.

      • suyts says:

        Yes, yes. I understand all of that. And, it is a correct thought. However, there are plenty of more places one can keep money safe, which the money doesn’t lose as much value as you store it. …. it’s especially easier as the amount gets larger.

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