Treasury notes sold at record low rates yielding 0.005 pct while companies pay 10.8 pct on debt

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2008-12-13 07:45

Frank K
Colorado Springs, CO

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In this December 12th Bloomberg article, "the government sold $27 billion of three-month bills this week at a discount rate of 0.005 percent, the lowest level since the auctions began in 1929."

On the other hand, "companies are paying an average 10.8 percent on their debt, up from 6.53 percent in January".

"Right now there’s a tremendous flight to quality that’s going on. A lot of people globally are concerned still about the viability of the financial system.”

The US and the Fed has committed $8.5 trillion to date to rescue the financial system, but so far this amount has not succeeded in unlocking credit markets that seized up with the collapse of the subprime mortgage market.

Bloomberg stated that "The government invested or loaned financial institutions $3.2 trillion to stem the financial crisis and jumpstart lending. The Federal Reserve pledged to buy as much as $2.4 trillion in short term corporate debt, and the Federal Deposit Insurance Corp. will guarantee as much as $1.4 trillion of interbank loans. The Fed will spend as much as $800 billion to purchase debt issued or backed by government-charted mortgage-finance companies and to support consumer and small-business loan markets."

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