If the stock market's latest gyrations are making you suffer, just wait until you see where the real action is: Treasury bills.

Yes, you heard me right. The often-boring world of short-term fixed income is the eye of the financial cyclone that's stressing out the investing world. In an area where traders measure most moves in hundredths of a percentage point, yields on the shortest obligations of the U.S. government have dropped like a stone.

Treasury Bill

Rate at 7/30 Auction

Rate at 8/20 Auction







Put another way, the three-month T-bill has lost 40% of its yield in the past two weeks. And those yields have dropped as much as a full percentage point in a single day. Those wild gyrations have pundits calling for the Federal Reserve to go further than its half-point discount rate cut on Friday, by cutting the more-significant fed funds rate.

Bad news for savers
In the meantime, however, if these low rates stick around, you'll start seeing the impact on your savings soon. Those who buy Treasury securities for their savings already face a potential drop in their income. Yields on money market mutual funds will follow suit, although they'll likely fall more gradually over the coming months.

However, there are still many banks with attractive CD offers. Bankrate reports that more than a dozen banks still have three-month CD rates of more than 5%, led by Countrywide Financial's (NYSE:CFC) bank subsidiary. And while some depositors have been concerned that Countrywide's mortgage woes could spill over into their bank, the bank has assured its customers that it is fully insured by the Federal Deposit Insurance Corp.

Time to lock in?
While short-term paper has been rocked by these big moves, there have also been bumps in the road for longer-term bonds. Although companies like Kroger (NYSE:KR), EnCana (NYSE:ECA), and even Bear Stearns (NYSE:BSC) have found a market for newly issued bonds, Treasury yields on longer-dated paper have dropped substantially.

It's too early to tell whether this is the start of a lower trend in interest rates or just a crisis-related blip. Regardless of what happens with rates, using a bond ladder to lock in rates with various maturities helps you to smooth out rate movements and the impact they have on the income your bonds pay you. Even though 5% may not seem like all that great a rate to lock in for the next five years, falling rates in the future may make you wonder why you didn't grab onto that rate when you had the chance.

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Fool contributor Dan Caplinger may migrate from Treasuries to CDs soon. He doesn't own shares of the companies mentioned in this article. The Fool's disclosure policy is as safe as can be.