Ever wonder who would invest in 0% interest treasury securities ?
While regular folks like you and me can invest in treasury securities, we aren’t driving the market. Treasuries are where institutions play. When it comes to big money market funds, and cash/income components of various mutual funds or other investments, these institutions are usually buying up treasuries. Especially with money market funds, since safety is paramount, these securities are the go-to place to find safety. That being said, this is where billions of dollars are traded. Yield, or rate of return isn’t as much of a concern as protection of principal, so the 0% rate is of little concern.
In addition to institutional investors, foreign banks are the other major player. In fact, the government reports that about half of the over $5 trillion in publicly traded debt is owned by foreign nations — namely China. Even with the economic turmoil here and abroad, U.S. debt is still viewed as one of the safest investments around the globe. So, when yields are down, it doesn’t matter when you’re looking for absolute safety on a global scale.
And finally, you have many pension funds investing heavily in safe investments like treasury securities. Just like money market mutual funds that seek safety, you have plenty of pension funds worth billions that need to be able to keep up with paying current retirees, and to allocate investments in this economic climate to protect what assets they do have.
Who Invests in 0% Interest Treasury Securities and Why? : Generation X Finance.
1 comment so far ↓
Good information.
It is also for the price appreciation. Look at TLT.
Regards
Amit
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