And the current Treasury auction of 28-day notes...

...goes for a yield of 0.0%. That's right, the US Treasury has just borrowed $27.7 BILLION dollars for 28 days at a ZERO rate of interest. (Issue date, 12/17, due 1/14.) More. They received bids totalling $121 Billion at a zero interest rate. More. Last week, the Treasury borrowed $28..7 Billion, with $154 Billion bid, at a zero interest rate.

And there are both transactions costs and foregone interest involved here. (Not much foregone interest; my credit union is paying 0.3% per year, so, on the most recent $27 Billion, the 28-day interest payable at 0.3% per year would be a little over $6 million over the 28 days of the term of the T-notes.) So the real return on these is negative.

Now, I don't do finance (I am thankful about that), but this could stand some explaining. One of my colleagues--who does do finance--suggests the purchases are being made by governments. So they must view the next-best-alternative (holding the $27 Billion in non-interest-bearing bank deposits?) as carrying enough risk to offset something around $10 million of opportunity costs.

What's scary, I think, is the excess demand for these notes even at a zero rate of interest. If the "flight to safety" of US Treasury notes is still proceeding at that rate, then maybe we should be a little more concerned than we are about the fragility of the world financial system...