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Investors Turn to Low-risk Securities With Little Return

As economic turmoil continues to rock the financial market, some investors are more willing to buy U.S. Treasury securities with low or zero yields in the short term. Analysts examine how the struggling economy is driving investors to minimal-risk investments.

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  • JIM LEHRER:

    Next tonight, how investors fled for safety to government securities this week. Jeffrey Brown has that story.

  • JEFFREY BROWN:

    As an article in today's newspaper put it, "When was the last time you invested in something that you knew wouldn't make money?"

    In a world of financial pain and uncertainty, nervous investors are turning to what remains the safest thing going: U.S. government debt. And they're doing it to the point of accepting essentially a zero percent rate of return — for a while yesterday — and historically low yields that continued today.

    Vikas Bajaj co-wrote that article today for the New York Times. Also with us is Nick Perna, managing director of Perna Associates, an economic analysis consulting firm.

    Well, Vikas, help us understand this. What happened yesterday? What kind of investments are we talking about?

  • VIKAS BAJAJ, New York Times:

    Sure. We're talking about the U.S. Treasury bills, which are short-term debt issued by the U.S. government to fund its various operations, you know, money that could go to pretty much anything that the U.S. government does.

    And, you know, a colleague of mine today said that, look, it's not so much about whether you get a return on your money. When was the last time you bought something, an investment, where you got your full money back, where you had your money returned? Certainly in stocks, that's not true. Certainly in a lot of corporate bonds, that's not true, in a lot of mortgage-backed securities that is definitely not true.

    So this is a question of, what can you put your money into that you know it's going to be there when it matures?

  • JEFFREY BROWN:

    So, Nick Perna, does that sound right to you? Does that sound like what's going on?

  • NICK PERNA, Perna Associates:

    Yes, it's that, plus the fact that short-term money rates are dominated by what the Federal Reserve does. So the Fed, over the last year-and-a-half, has brought the Fed funds rates down from 5.25 percent to 1 percent.

    So even if there were not a flight to quality, you'd still get very little on Treasury bill rates and the like because whenever the Fed works its magic to bring down the Fed funds rate, it affects all short-term rates.

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