A Mad Rush for Relative Safety

From Bloomberg's Sandra Hernandez:

U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 as a loss of confidence in credit markets worldwide prompted investors to abandon higher-yielding assets for the safety of the shortest- term government securities.

Investors pushed the rate to 0.0304 percent on concern that credit market losses will widen after the bankruptcy of Lehman Brothers Holdings Inc. and the federal takeover of American International Group Inc. In a sign of banks' reluctance to lend, the rates charged for short-term loans relative to Treasury bill rates rose to the highest at least since the stock market crash of 1987.

``It's scary,'' said E. Craig Coats Jr., who co-heads fixed income at Keefe, Bruyette & Woods Inc. in New York and started trading bonds in 1969. ``This is the worst it's ever been since I've been in the business. Nobody knows what's really going on. Systemic risk is here and there and everywhere.'' 

And Reuters' John Parry:

The yield on 3-month U.S. Treasury bills fell to 0.02 percent early afternoon New York trade on Wednesday amid investors' panicked scramble into the safe haven of ultra short-dated government securities, traders said.
The 3-month U.S. Treasury bill yield "last traded at 0.02 percent as an actual trade and may have traded negative earlier today," said Sean Murphy, Treasuries trader at RBC Capital Markets in New York, shortly after 12:30 p.m. EDT.

The last time the 3-month U.S. T-bill yield was at or below zero was in January 1940, said Bryan Taylor, chief economist with Global Financial Data in Los Angeles.