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Rates on 6-month T-bills rise again

Associated Press / October 27, 2009

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WASHINGTON - Interest rates on six-month Treasury bills rose for the second straight week in yesterday’s auction after nearly two months of record lows, while rates on three-month bills fell.

The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.075 percent, down from 0.080 percent last week. It was the lowest level since those bills averaged 0.070 percent two weeks ago.

Another $30 billion in six-month bills was auctioned at a discount rate of 0.185 percent, up from 0.170 percent last week. It was the highest level since those bills averaged 0.190 percent three weeks ago. It also marked the second straight week that rates on six-month bills rose after nearly two months of lows not seen during the half-century the government has been issuing the bills weekly.

But both three- and six-month bills remain at historically low levels, as the recession has cut demand for credit among consumers and businesses. The low rates also reflect a move by the Federal Reserve to keep a key short-term interest rate at a record low in an effort to jump-start economic activity.

The discount rates reflect the bills sold for less than face value. For a $10,000 bill, the three-month price was $9,998.10, while a six-month bill sold for $9,990.65. That would be an annualized rate of 0.076 percent for the three-month bills, and 0.188 percent for the six-month bills.

Separately, the Federal Reserve said the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, rose to 0.39 percent last week from 0.36 percent the previous week.