If you haven’t kept up with the news, US Treasuries are now returning a whopping 0% return which means that investors are lending the US government money and simply expecting a return of their principle and sometimes even a little bit less than their original principal.

The US Treasury market actually had bid FOUR times higher than were available so essentially one out of four buyers didn’t get the privilege of lending the government at zero percent.

Why are investors so eager to lend money at zero percent? Security. The US Treasury market is backed by the most powerful agency in the universe: IRS. The government can always impose, raise and collect taxes to pay back Treasuries to their investors and they’ll do this to keep the money flowing otherwise the US Government would instantly go bankrupt if they began defaulting on loans.

Unfortunately, while borrowing at zero percent is a great deal for Uncle Sam it is, to me at least, a clear indication that we are now headed toward a massive Treasury bubble. Everything will be fine for the next few months or years that this bubble continues to grow but as we’ve seen with the housing bubble and dot com bubble, all bubbles come to an end.

What can we expect when the Treasure bubble pops? For starters, soaring rates for government debt which means we may see today’s zero rate treasury pop to eight percent in a few years and maybe that why I keep dreaming about it so much.