Which Treasury bills' rates fell below zero on Tuesday?

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Question: Which Treasury bills' rates fell below zero on Tuesday?

Answer: three-month bills

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Treasury Yield Falls to Zero As Investors Seek Safety

Investors fearful of deflation and riskier assets scrambled to hand over cash to the US Treasury in return for no interest at an auction Tuesday, while some T-bill rates fell below zero in the market.

Pressures on fund managers to stock up on the safest possible assets in advance of year-end book-balancing added to the bid for government securities, traders said.

The U.S. Treasury Department said it sold four-week bills at a high rate of 0.000 percent, a level never before seen, in a $30 billion auction.

When Treasury bill rates turn negative it shows that investors are so concerned about the safety of other assets that they are willing to effectively pay the U.S. government a fee to look after their money.

Rates for three-month bills in the market fell below zero, according to fixed-income trading platform Tradeweb.

"There is just a continuing flight to safety with money that needs to be invested," said Lou Brien, a market strategist with DRW Trading Group in Chicago. "Money funds want it to be invested rather than under the mattress, which is continuing to push rates lower."

The view that the Fed will use other methods in addition to cutting short-term interest rates to ease monetary conditions drove prices of long-dated Treasuries prices higher as well, sending yields on those maturities toward five-decade lows.

Video: More on the Treasury auction.

"The Fed is going to keep long-term borrowing costs low, which is going to keep the curve flat," said T.J. Marta, fixed income strategist at RBC Capital Markets in New York.

The Fed is expected to cut short-term rates by at least half a percentage point at its policy meeting next week.

Last week Fed Chairman Ben Bernanke said the U.S. central bank could directly purchase "substantial quantities" of longer-term securities issued by the U.S. Treasury or government-sponsored agencies to lower yields and stimulate demand.

Bill rates fell to zero in mid-September when Lehman Brothers collapsed, sending panicked investors to the relative safety of government paper.

"There's still a ton of fear," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "People are now paying the government to take their money. Something is wrong."

Still, "for the Treasury, it's great financing," said Rudy Narvas, senior strategist at 4Cast Ltd in New York. "For everyone, it's not a good sign that things will get better ...That's fool optimism.A quick recovery is not going to happen."

In late trade, the price on the U.S. long bond was up 2-13/32, its yield falling to 3.05 percent from 3.16 percent late Monday.

Benchmark 10-year notes rose 27/32, their yields easing to 2.65 percent from 2.75 percent late Monday.

Ten-year yields held a 180 basis points premium above two-year notes , versus 181 basis points on Monday.

Five-year Treasury notes benefited from rate-lock buying related to hedges on a $3 billion five-year note sale by Fannie Mae , traders said.

The Treasury will sell $28 billion in three-year notes on Wednesday and $16 billion in 10-year debt on Thursday.

Persistent year-end safety bids for Treasuries should readily absorb the upcoming supply, analysts said.

BONDS, TREASURYS, TREASURIES, 10-YEAR NOTES, 2-YEAR NOTES, T-BILLS, DEFLATION, U.S. ECONOMY

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URL: http://www.cnbc.com/id/28143828/