BREAKING*** 3 MONTH T-BILLS AT LOWEST RATES SINCE 1929!!!!

Treasury Sells Three-Month Bills at the Lowest Rate Since 1929

By Michael J. Moore and Liz Capo McCormick

Dec. 8 (Bloomberg) -- The Treasury sold $27 billion in three-month bills at the lowest rate since it starting auctioning the securities in 1929 amid record demand for the safety of U.S. debt during the worst financial crisis since the Great Depression.

The bills were sold at a high discount rate of 0.005 percent, the Treasury said today in Washington. At last week’s auction, the bills drew a rate of 0.05 percent. The government received bids for the bills totaling more than triple the amount sold.

“It’s all about capital preservation,” said John Canavan, a fixed-income analyst in Princeton, New Jersey, at Stone & McCarthy Research Associates. “People are afraid to put their money anywhere else so they aren’t terribly concerned about returns.”

The Treasury also sold $27 billion in six-month bills at a high discount rate of 0.30 percent, the lowest since at least 1958. At last week’s auction, the six-month bills drew a rate of 0.43 percent.

The rate on three-month bills peaked at 16.75 percent in May 1981, according to Federal Reserve data. Today’s rate was the lowest since the government began issuing the three-month bills in 1929, according to Stephen Meyerhardt, a spokesman for the Bureau of Public Debt in Washington.

“There are also deflation concerns,” Canavan said. “Although we are at a near-zero yield, if you are expecting a deflationary environment over the next few months, then the real return is a little bit better.”

Record Lows

Yields on two-, 10- and 30-year securities declined last week to the lowest levels since the Treasury began regular sales of the debt after a report showed U.S. employers eliminated jobs in November at the fastest pace in 34 years and the Fed contemplated buying U.S. debt as the recession deepened.

President-elect Barack Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs in the biggest public-works spending package since the 1950s.

The return to investors is 0.005 percent for the three- month bills, with a $10,000 bill selling for $9,999.87. The return to investors is 0.3 percent for the six-month bills, with a $10,000 bill selling for $9,984.83.

Treasury bills, which represent short-term government borrowing, are sold at a discount from maturity value. The amount paid to investors at maturity reflects the difference between the price paid for a bill and the par value.

Indirect Bids

The Treasury sells all its bills, notes and bonds on a single-price basis, in which securities are awarded at the highest rate needed to sell all the securities.

In the three-month maturity, 82.98 percent of the bids that were filled came in at the high discount rate of 0.005 percent. The low rate submitted was zero percent, the median rate was zero percent, and the investment rate was 0.005 percent. The price was 99.998736.

Indirect bidders, a group that includes foreign central banks, bought 57.6 percent of the three-month bills and 27.1 percent of the six-month bills. Primary dealers bought 42.1 percent of three-month bills and 72 percent of the six-month bills.