Tuesday, September 16, 2008

The race to US Treasuries, The Last Bubble

Sept. 16 (Bloomberg) -- The cost of borrowing in dollars overnight more than doubled to the highest since 2001 as the collapse of Lehman Brothers Holdings Inc. and credit downgrades of American International Group Inc. led banks to hoard cash.

The overnight dollar rate soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The rate was as low as 2.07 percent in June.

U.S. Treasuries soared, stocks dropped and the cost of default protection on Wall Street banks rose to a record as investors sought the safety of government assets. The yield on the 10-year note dropped to the lowest in five years and the Standard & Poor's 500 Index lost as much as 1.6 percent. Credit- default swaps on Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. all traded at record highs.