90 day T-bill rate drops to 0.23%. What’s next, negative yields?

This is a serious panic. Bloomberg informs us that rates haven’t been this low since 1954.

Click image for sharper view. Source: Bloomberg

Yields can go negative if people are desperate enough for a safe haven. In deflation negative nominal yields can be positive real yields. CPI went slightly negative in August. Expect significant price drops in everything over the next couple of years — including your own labor!

The long end of the curve still has plenty of room to come down. The 10-year should be 2% before long, and the 30-year could fall under 3%.  Anyone who thinks that lower yields are good for stocks needs to explain this:

30-year Treasury yield in blue, S&P 500 in red:

Click image for sharper view. Source: Yahoo! Finance

Welcome to the deflationary depression of the 2000s. Got cash?

The Bond Bubble is in Munis, not Treasuries

Investors looking for bonds to short should look here:

Source: bloomberg.com

Not here:

Source: bloomberg.com

Talk about all risk and no reward! Township and state revenues are falling through the floor, and politicians are exceedingly reluctant to cut bloated budgets. Next year, I bet the default rate on Munis will be as high as the Florida mortgage default rate (well into the double digits). Vallejo California was just the canary in the coal mine. Not every town pays their firemen $250k, but most pay $55-70k with full benefits and retirement by age 48. Here’s a look at firemen in Vallejo making 200-300k per year. This is too absurd not to publish:

Source: sfgate.com

Yes, the federal government is just as broke, but its powers of taxation are practically absolute, and it has a central bank to print up any shortfalls. Hence, US debt is the ultimate near-to-intermediate term safe-haven. This Treasury rally is no bubble. This is what a good, hard, deflation looks like.