Short-term T-bill rates increase in auction

WASHINGTON -- Interest rates on short-term Treasury bills rose in auction yesterday to the highest levels in nearly five years.

The Treasury Department auctioned $17 billion in three-month bills at a discount rate of 4.070 percent, up from 3.905 percent last week. Another $15 billion in six-month bills was auctioned at a discount rate of 4.265 percent, up from 4.200 percent last week.

The three-month rate was the highest since these bills averaged 4.125 percent on April 2, 2001. The six-month rate was the highest since 4.420 percent on March 12, 2001.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,897.12 while a six-month bill sold for $9,784.38.

Federal offices were closed Monday in observance of the New Year's holiday, so the weekly Treasury auction was held yesterday.

Separately, the Federal Reserve said the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, edged down to 4.36 percent last week from 4.37 percent the previous week.