The US Treasury was able to sell $21 billion of six-month bills at a minuscule yield of 0.065%. It also auctioned off $21 billion in three-month bills. Each dollar of the bills offered got chased by $4.14 in bids -- the highest bid-to-cover ratio since June 22 when China was in full-crash mode. With buyers jostling for position to grab whatever they could, these bills sold at a yield of zero for the first time in history.


Which leaves us with a quandary: The stock market rally says folks believe that the bonanza will continue, that risks have disappeared, that the economy is hot, and that the Fed will never take away the punchbowl.

But the Treasury market shows that others are desperate to put their money into highly liquid and safe places, even if it costs them money -- a behavior normally visible ahead of a looming crisis. Even then, the Treasury had never before been able to auction off three-month T-bills at a yield of zero.


According to [Rosengren] and numerous other Fed heads, rate hikes are still prominently on the table for this year. But after all the flip-flopping, no one believes the Fed anymore. The Fed's credibility has gone to heck. The Fed is never going to put its foot down, ever again. That's what the market is increasingly sure of.

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