The shortage of U.S. Treasury bills has created panic among the global money markets. This also triggered a massive sell-off mood among bonds. The bill rates remained low even after United States Treasury Department appealed about the price increase. This highlighted the large scale of the problems in the finance sectors.
The last two weeks have been most challenging for the bond markets as many of the rates have become negative and reaching levels same as 2008 financial crisis. The supply has been a multi-decade low and investors are pointing out that the regulations to cheer up banks and avoiding money market funds is resulting in the bill shortage. The JP Morgan Chase & Co., an investment banking major has projected that it expects more $900 billion of demand for government securities during next 18 months.
This will exert the pressure on the bill market, which has capitalization of $1.4 trillion. Chicago-based Alex Roever from JPMorgan’s U.S. interest rate strategy division informed that safe assets are creating difficult situations for the supply. All money needs to be converted into liquid. Money-market funds are worth $2.5 trillion and the consequences are not limited to fixed income market but almost funds industry. This will give less income to the investors as the central bank starts increasing interest rates, which is expected by the end of this year. The deadly combination of supply and demand has been so strong that now bill rates decreased to negative 0.0304 percent by the end of April.