Earlier today we posted “What Should We Make Of Negative T-Bill Rates?” We concluded:
What caused the downdraft this week? Here we agree with the seasonal argument highlighted above. Bills that mature in 2010 are in demand.
This begs the question, “Does seasonality exist in T-bill total returns?” In other words, do managers normally pile into T-bills near year-end to either make their balance sheets look more attractive or simply to take risk off the table?
The chart below shows the total return of 30-day T-bills by month since 1981. One could quibble about the significance of a few basis points over the span of any given month, but taken at face value December actually ranks as one of the worst months for T-bill total returns (meaning higher yields).
This does not necessarily argue against the idea that managers pile into T-bills near year end for the reasons cited above, but it is not happening in large enough volume to make any real difference in this market.
<Click on chart for larger image>
Just for reference, below is the chart showing T-bill returns by month during 2008. The same basic seasonal pattern can be seen.
<Click on chart for larger image>