Lots of talk the last few sessions about a rush of cash into very short-term US Treasuries. The three-month bill, which takes you over the turn of the year, yields less than 2 basis points and has flirted with negative yields in recent sessions.
If investors are willing to pay just to get their money back, a phenomenon we saw at the depths of the financial crisis, how can risk assets still be anywhere near a premium? Something has got to give.
If the market is telling us it is that jittery, we should anticipate one of those big downdrafts in the emerging markets in coming days. Developed markets are only a few percent below their rebound highs. They would have plenty of downside room as well.
Currency-wise, the dollar would be a beneficiary in that environment as well, reasserting its safe-haven status like in late 2008.. Low rates may not be a dollar negative, for a change, they could be a sign that markets are getting ready to panic.
