It's not about return on investment, it's about return of investment.

[randomness]

From Business Week:

The U.S. government received record demand for its bonds in 2011, pushing longer-maturity Treasuries to their best performance since 1995 in a sign that President Barack Obama may have little difficulty financing a fourth consecutive year of $1 trillion budget deficits.

The Treasury Department attracted $3.04 in bids for each of the $2.135 trillion in notes and bonds sold, the most since the government began releasing the data in 1992 during the George H. W. Bush administration. The U.S. drew an all-time high bid-to-cover ratio of $9.07 for $30 billion of four-week bills it auctioned on Dec. 20 even though they pay zero percent interest.

This is one of those things that tends to go on until it reverses abruptly. On the other hand, as long as the Europeans continue their Keystone Cops routine, it'll probably continue.

(I don't know why the dateline on this Bloomberg wire story is tomorrow, however.)

Comments

[cerebralpaladin.livejournal.com]

I have a random question about this. My understanding is that the US Treasury won't sell Treasury bonds with a negative yield (i.e. selling a bond for $500 that pays $499 at the end of a year). (Yields on outstanding T-bills can go negative, but that's based on prices in the secondary market, I think.) At the same time, if the bonds are oversubscribed at 0% interest, there would presumably be demand for bonds that had a very small negative yield, which would obviously be advantageous for the government. Do you know, is there a good reason that the government maintains a 0% floor in its sales?