by Daniel Costello

Would you invest in something you knew wouldn't make money?

In the market equivalent of shoveling cash under the mattress, so many buyers were eager this week to park money in the world's safest investment, United States government debt, they agreed to accept a zero percent rate of return or even take a loss.

The annualized yield on three-month T-bills fell to a barely positive 0.01% on Wednesday, down from 0.07% at the beginning of the week and the lowest level since last December. The two-year T-note yield slid to 0.70%, compared with 0.81% a week earlier and also the lowest since December.

Traders said some T-bills were trading at slightly negative yields — meaning buyers were in effect paying to keep their money in the securities, as opposed to earning a return on them.

 

The highly unusual series of events may look like the fear-driven panic of last fall, when treasury yields last went negative. But this time is different, analysts say.

In large part the latest decline in shorter-term yields stems from moves by banks and other financial firms to bolster their balance sheets with highly liquid assets as 2009 ends.

Still, the cautious approach does reflects investors' longer term concerns that a global recession could deepen next year, and continue to jeopardize all types of investments.