Re:3 month t-bill yield 0,02% - maybe traded negative
by quasimojo on Thursday September 18, 2008 @01:04AM
(#307899)
insuring 10-year T-notes against default
sold by the same people who are selling you "sun goes nova" insurance
US treasuries can be paid out with created accounts. this is US law. inside the US, treasuries essentially cannot default by definition while the government and banking system is intact. if the government and banking system dissolve, who is going to pay out these claims and how? nonsensical
Re:3 month t-bill yield 0,02% - maybe traded negative
by ckinnan on Wednesday September 17, 2008 @11:01PM
(#307826)
There is a flight to security on concerns about the stability of money market funds. If your startup uses money market accounts for working capital/payroll you should make sure the fund doesn't have corporate bond exposure
Re:3 month t-bill yield 0,02% - maybe traded negative
by michaelneale on Wednesday September 17, 2008 @11:58PM
(#307859)
I never quite understood why startups do that - I mean, from an investors point of view, isn't there enough risk already? (I guess the assumption was that money markets was as good as cash).
Re:3 month t-bill yield 0,02% - maybe traded negative
by quasimojo on Thursday September 18, 2008 @01:15AM
(#307905)
these will not go negative, this yield was a temporary spasm
think about it, who is going to volunteer to lose money on short term govt debt? just leave your money in cash. its not like inflation is going to destroy your cash in 90 days. especially considering that we are entering a deflationary period
Re:3 month t-bill yield 0,02% - maybe traded negative
by micks56 on Thursday September 18, 2008 @02:12AM
(#307942)
I think the people buying these are worried that the cash won't exist in 90 days. If the bank they deposit their cash in goes bankrupt they get nothing. The people buying the T-Bills are well above the $100k FDIC limit. Therefore, by buying the T-Bill, they protect their downside by betting the US government does not go broke in the next 90 days.
That would be my guess as to why they want to stash their money away for 90 days. After 3 months the buyer can find out which bank still exists to even take a cash deposit. Cash in the T-Bill and decide what to do. In the meantime, buyers have 3 months to figure out what to do in this market. Its almost like hitting a pause button with your money and giving yourself time to think this out.
Re:3 month t-bill yield 0,02% - maybe traded negative
by quasimojo on Thursday September 18, 2008 @12:15PM
(#308302)
The people buying the T-Bills are well above the $100k FDIC limit
dude, it is an utter triviality to spread your money in cash-equivalent 100k increment accounts, brokerages do this all the time. no one takes a loss on treasuries because they have $100k + n in their account. the eight people who upmodded you have simply never had to perform this trivial transaction
Re:3 month t-bill yield 0,02% - maybe traded negative
by micks56 on Thursday September 18, 2008 @02:29PM
(#308415)
Yes, it would be trivial for me to spread a few hundred thousand around a few banks so that I could be within the FDIC limit. What is not trivial is a brokerage spreading around $50MM across 500+ banks.
What I was trying to explain is that the people buying the T-Bills aren't individuals looking to put their money some place safe. These are large institutional investors looking to park millions (hundreds of millions?) of dollars in a safe place till they can figure out what to do.
sold by the same people who are selling you "sun goes nova" insurance
US treasuries can be paid out with created accounts. this is US law. inside the US, treasuries essentially cannot default by definition while the government and banking system is intact. if the government and banking system dissolve, who is going to pay out these claims and how? nonsensical
and yes, the amount of money your startup has in its mm is definitely pedestrian
think about it, who is going to volunteer to lose money on short term govt debt? just leave your money in cash. its not like inflation is going to destroy your cash in 90 days. especially considering that we are entering a deflationary period
That would be my guess as to why they want to stash their money away for 90 days. After 3 months the buyer can find out which bank still exists to even take a cash deposit. Cash in the T-Bill and decide what to do. In the meantime, buyers have 3 months to figure out what to do in this market. Its almost like hitting a pause button with your money and giving yourself time to think this out.
ps. Not a finance guy here by any means.
dude, it is an utter triviality to spread your money in cash-equivalent 100k increment accounts, brokerages do this all the time. no one takes a loss on treasuries because they have $100k + n in their account. the eight people who upmodded you have simply never had to perform this trivial transaction
What I was trying to explain is that the people buying the T-Bills aren't individuals looking to put their money some place safe. These are large institutional investors looking to park millions (hundreds of millions?) of dollars in a safe place till they can figure out what to do.