Tuesday, March 23, 2010

Treasurys No Longer Risk Free

It looks like this generation may be the one to see a new definition for "risk free interest rate".

From Bloomberg yesterday:

The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity ... Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

Wikipedia also has a good article on the importance of this to investment models.

No comments:

Post a Comment