Ya wanna know how bad it is? Part Two

Treasury bonds, the way the government does short-term borrowing to operate, are considered a safe if unspectacular investment. Because of their safety, they're also a pretty reliable indicator of investor confidence: Obviously, the more confident investors are, the more prepared they'll be to make riskier investments with greater possible returns - and vice versa. It's with that in mind that you should read this, from ABC News Moneybeat:

The most recent auction of $30 billion worth of 28-day Treasuries had four-times the number of buyers than they had bonds, and at zero percent interest. First time that’s ever happened.

It’s a sure sign that investors are scared. They’d rather park their cash with the government and get no appreciation – just the principle back – than risk it in the stock market or even a bank account.

Read that again: zero percent interest. Scared? Damn straight. Scared enough to be focused entirely on merely not losing rather than on any hope of gaining. Scared enough that there were four times as many of them that wanted to do that than there were bonds to sell them.

And it’s not just the four-week bonds that are pegging all-time low interest rates. On Monday, $27 billion worth of three-month Treasury bills were auctioned with an infinitesimally small 0.005% rate – the lowest on that particular term since the government first issued them in 1929.

In the secondary market today, where investors buy these bonds from the original auction winners, these three-month government bonds actually had a negative yield. Investors who want to park their money in these super-safe instruments were actually willing to give up some of their principle to get their hands on government paper.

A negative yield - you're loaning money knowing you're going to get back less than you put in - is looking like a good enough deal to enough investors to make it happen. Are investors scared? Damn straight they are.