The US Federal Reserve announced a raft of new initiatives to prop the enfeebled and a dysfunctional Treasuries, mortgage, and corporate credit markets on Monday.
The result has now seen US banks pay the Central Bank, a situation that highlights how grim the situation is on the ground.
Amid the wide-spreading pandemic and rising COVID-19 cases in the United States and Europe, Bitcoin, buoyed by news that the Fed is officially on an infinite QE circle is up 11% in the last trading day.
US Banks Paying the FED, Short-Term Treasuries in Negative Territory
As observed by Larry Cermak, a crypto influencer, the 1M, 2M, and 3M US Treasuries are all in the negative territory.
1M, 2M and 3M US treasuries all now have a negative yield. Banks are paying the Fed to take their money. pic.twitter.com/vSNXgShfcY
— Larry Cermak (@lawmaster) March 24, 2020
This means, instead of the FED paying, holders, a majority of whom are banks, will end up compensating the FED. However, there is more.
Analysts say this paints a grim situation in the next couple of months and the likelihood of the US economy tanking as COVID-19 shreds.
Larry explains that banks now have more money and there is nowhere to store them excerpt in negative-yielding Treasuries:
“Why? Because if you have a lot of money, you have nowhere to store it right now. Bank accounts are generally only insured for up to $250k. You can’t store it in equity (or most of other assets) because all of their values are tanking. It shows no faith in the current market.”
“Basically people are so terrified to hold securities in the short term that they’d rather lose (very little) money rather than to risk losing it in literally anything else.”
Investors Cautious as Bitcoin adds 11%
Investors across the spectrum are obviously jittery, cautious to commit as analysts foresee high inflation and unemployment rates in the next couple of months.
The money printing to shore corporations that have been adversely affected by the rapidly spreading virus, chopping processes, and disrupting supply chain is necessary yet damaging in the medium to long term.
With lock-downs and people unable to work, the number of unemployment claims continues to soar. Meanwhile, Bitcoin and safe havens like gold continue to outperform the traditional markets despite their lack of interest-bearing.
BTC is trading at $6,730 and is up 16% in the last trading day, pushing weekly gains to 32%.