Who Knew?

There is sheer panic in international markets this Thanksgiving because of news that Dubai is delaying payment on debt of Dubai World until May 2010. The Financial Times index is down 3.18%. Is Dubai's delay in paying in paying the debt the reason Treasury Bills have been paying a negative yield over the last week or so?

This is what I wrote on November 19:

Dow Jones reports that January and February T- bills hit a yield of -0.03% earlier.

Got that? Negative .03%.

This is a very spooky sign. It means major players don't want to go further out on the yield curve to earn money. They are only willing to keep their funds very liquid and pay for the privilege as opposed to earning money. This means one thing and one thing only, they are real scared about something. On a best case scenario, they are thinking longer rates are headed higher, so why invest now. On a worst case scenario, they are thinking all hell is going to break lose and they want their funds liquid to meet withdrawal requests.

Were government leaders and some traders tipped off that Dubai would make an announcement on the evening before Thanksgiving when U.S. markets were closed? Did they trade on this information?

The release of such news late Wednesday on the day before Thanksgiving, which means US traders can't, for the most part, react, and where most traders are away until Monday, suggests a sophisticated PR timed release, not likely planned out of Dubai, more likely coming out of the US.

Markets don't lie. It sure looks like that mysterious downtrend in interest rates might have been anticipating the Dubai News Dump.

Who knew?