News: Analysis & Commentary: Finance
Are T-Bills Y2K Insurance?
Investors brace for the bug by buying short-term Treasuries
Forget about stockpiling batteries in the basement. Now there's another commodity to stow away to get you through the turn of the millennium: short-term Treasury bills. Investors who want some extra protection--even if the global financial system doesn't melt down at the stroke of midnight on Dec. 31, 1999, as some Cassandras predict--are stockpiling T-bills just in case. "There's a basic presumption in the market that if the U.S. government isn't Y2K compliant, no one will be," says Neal M. Soss, an economist at Credit Suisse First Boston in New York.
Demand for the six-month T-bill is so heavy, it's pushing up prices. Yields, which move in the opposite direction of price, fell 44 basis points, to 4.70% during the first two weeks of July--taking a bigger plunge than other bonds, including one-year Treasuries (chart). Such a large move in a short period of time demonstrates that Y2K concerns are growing, says John E. Silvia, chief economist at Kemper Funds in Chicago.
Investor worries may be misplaced. U.S. regulators are optimistic that banks and other financial institutions will have their systems ready to usher in the New Year. Fed Governor Edward W. Kelley insists that the U.S. banking industry is "overwhelmingly ready." If he's wrong, investors who sought safety in Treasury bills will be prepared. Plus, the Fed has an extra $50 billion in cash ready to provide liquidity, just in case. No matter, investors will sleep better between now and Jan. 2, 2000.By Laura Cohn in WashingtonReturn to top
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