Yields on the safest, short-term Treasurys settled into negative territory for the first time in more than four years, as investors continued clamoring for cash and safe dollar assets even as some markets showed signs of normalization.
The one-month Treasury bill yield closed at minus 0.041% Wednesday and the three-month ended at minus 0.046%, the first time they have closed the day below 0% since late 2015, according to Tradeweb. Yields remained in negative territory early Thursday with the yield on the three-month Treasury at minus 0.028%.
“People are desperate for cash-like equivalents,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “The safest thing you can get is Treasurys.”
Buying a bond with a negative yield means investors will receive less money back when the debt matures, upending a basic relationship that has ruled financial markets for centuries.
Negative yields on bonds have become commonplace in Europe and Japan, where central banks have used negative policy rates to spur growth. However, the Federal Reserve has all but ruled out using negative rates. Short-term Treasury yields briefly went negative in Sept. 2015, when the U.S. central bank put off a rate increase after an economic slowdown in China shook global markets.
The Fed has taken broad and repeated actions in recent weeks to ease tensions in the financial system. Those steps appear to have improved liquidity, the ease with which one can buy and sell in the market.
Investors, facing a sudden shutdown of many parts of the economy, have been scrambling for cash.
Photo: John Minchillo/Associated PressBut companies and investors, facing a sudden shutdown of many parts of the economy, have been scrambling for cash to cover their costs while revenue and income are disrupted. Short-term Treasurys are, for many investors and corporate treasurers, the closest thing to cash.
This rush for cash can be seen in how short-term debt yields have fallen further and faster than those on longer-term bonds.
The difference between three-month and 10-year yields remains near its widest since November 2018. It stood at 0.85 percentage point Thursday morning, having been as wide as 1.23 percentage points on March 18, according to Tradeweb.
— Paul J. Davies contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
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