Money Markets Not Benefiting From Rising Rates
Sober Look | Jun 12, 2013 01:58PM ET
While yields on shorter maturity treasury notes have risen over the past month, money-markets yields remain suppressed. The three-month treasury bill still hovers around 5 basis points. The uncertainty about the Fed's "taper" is spooking investors out of "risky" assets and into bills and other money-markets products. This higher demand for bills is holding down short-term rates near zero, even as longer-term rates rise.
Curve Steepens
This dynamic, of course, is not limited to the two maturities in the chart above. The whole front end of the curve has steepened materially without much impact on bill rates.
Once again, savers are punished -- they either have to take risk (such as rate or credit risk) or live with 5bp (or less). Money markets simply have not benefited from higher interest rates.
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