Treasuries are in such short supply in the $4.9 trillion-a-day repurchase agreement market used by bond dealers to finance their holdings that investors are lending cash for next to nothing to obtain the securities.

The average level of overnight general collateral repo rates traded through 10 a.m. New York time with ICAP Plc, the world's largest inter-dealer broker, was 0.04 percent yesterday. The rate fell to as low as 0.01 percent on May 5 and is down from 0.22 percent on Jan. 3. Rates haven't been this low since they fell to 0.001 percent in December 2009 as banks sought to hold Treasuries on their balance sheets as the year closed.

Overnight rates have been below 0.1 percent since April 15 as the U.S. budget stalemate and Federal Reserve's debt purchases reduced the amount of Treasuries available. The federal funds rate has traded at lower end of the central bank's target range since the April 1 adjustment to banks' Federal Deposit Insurance Corp. fees. The drop in rates is also cutting returns for holders of investments such as money market funds at a time when the Fed keeps borrowing costs at a record low.