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Rising Rates Won't Provide Relief in Treasuries Market

Even after Fed starts raising interest rates, demand for safest securities will likely keep yields depressed on U.S. Treasuries.

By Liz Capo McCormick, Bloomberg | Updated on June 18, 2015

Investors parking cash in the safest of U.S. assets probably won’t see immediate relief from depressed returns when the Federal Reserve starts raising interest rates.

The possibility of as many as two rate increases by year-end has failed to outweigh a mismatch between supply and demand for the shortest and safest of debt, with Treasury bill rates maturing through October locked at about zero percent. Global regulatory changes are boosting the need for high-quality assets from bills to repurchase agreements to bank deposits just as the supply is sliding.

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