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I forget. What else happened in 1929?

Oh, right. That.

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.

Paul Krugman said recently about a stimulus that we shouldn't worry about a size limit, and spend as much as we can. I'm still for flooding the market with a massive short-term auction. I think this would soften two problems. It would hopefully force money off the sidelines, while also raising money for the Treasury to buy high yield preferreds in troubled banks.

Posted by edelfenbein at December 8, 2008 8:50 PM