yesterday treasury yields on 3-month (or 1-month?) note went nagative briefly … i’m confused … how cn it go below zero …cn u just not hold the cash?
Sure - you can put $100M in your mattress.
People are buying at a premium
I always like times like this. Like every book ever written about interest rate models includes some sentence like “A problem with the Vasicek models is that with positive (but small) probability the model implies that interest rates can be negative. To deal with this problem…” Hmm, what problem exactly?
short HKD rates were frequently negative earlier this decade (2004, 2007)
It’s like saying i will pay US government to take my deposit, because I don’t trust *any* other deposit taking institution and I don’t have mattress big enough to store $100M … Time to rewrite many rules and many books … “The genius of the Vasicek models is that with positive (but small) probability the model implies that interest rates can be negative. …”
We have State Street with all kinds of money market fund trouble. Yesterday, for the second time in history a money market fund “broke the buck”. FDIC has $50B in capital against (I dunno) $10T in deposits. Who do you trust besides Uncle Sam? The problem with Vasicek is really the correlation thing - all forward rates have correlation 1.
so we are not using CIR model anymore huh?