Risk-free Return Transmogrifies to Return-free Risk
December 9, 2008 7:02 pm Economics and FinanceThe debt instruments of the US government are considered risk-free return because of the credit rating of the US government. The risk-free return changed today to return-free risk given that the returns for four-week US Treasury bills are now zero and that the risk is never zero.
The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.
These are historic times indeed. In UK the rates have hit the lowest since the Bank of England was established in 1694.
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Arran Gold
