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Investors, over the last 7 days, believe that there is more risk surrounding 1 mo Treasuries. A treasury is an investment that you get when you lend the govern
by marcamillion 13y ago
Investors, over the last 7 days, believe that there is more risk surrounding 1 mo Treasuries.
A treasury is an investment that you get when you lend the government money. They promise to pay you back with X% interest in a certain time period. In this case, we are talking about 1 month.
So, with the increase in interest rate from 0.10% to 0.27%, investors demand more return because they think it is now 170% more risky (Simply calculate the difference of 0.27 - 0.10), to lend the government money for a short-time period (1 mo), than it was just 7 days ago.
- digikata 13y agoBesides the absolute risks of default, an additional interpretation is that there is a risk that even if the shutdown/debt ceiling were worked out with no ultimate default - your principal and interest might end up tied up in some form of delayed hold on a one month scale, but that those issues are more likely to be resolved with no impact on a three month scale.
- marcamillion 13y agoGood point, because money today is always better than money tomorrow....the whole time value of money concept[1]. [1] - http://en.wikipedia.org/wiki/Time_value_of_money http://en.wikipedia.org/wiki/Time_value_of_money