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I wonder why government bills can have a lower yield than the central bank deposit rate. For example, the German 3 month bill is below 3.6% now.[1] Shouldn't b
by wcoenen 2y ago
I wonder why government bills can have a lower yield than the central bank deposit rate.
For example, the German 3 month bill is below 3.6% now.[1] Shouldn't banks be selling these bills, and putting the money with the ECB instead where they can get a higher risk free yield? Thereby driving the yield of the gov bonds up towards the ECB deposit rate?
[1] https://tradingeconomics.com/germany/6-month-bill-yield https://tradingeconomics.com/germany/6-month-bill-yield
- epoxia 2y agoMaybe it has to do with the duration, with there being a chance that the ECB could reduce rates again within a 3 month span?
- wcoenen 2y agoI didn't realize central banks could change rates so frequently. Apparently sometimes they do make changes every month, so it's a plausible explanation. But then I looked up 1 month bond rates, and apparently those are still below the deposit rate! http://worldgovernmentbonds.com/bond-historical-data/germany/1-month/ http://worldgovernmentbonds.com/bond-historical-data/germany...