Rates on three-month and six-month bills fall

AP News
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Posted: Dec 14, 2009 3:03 PM

Interest rates on short-term Treasury bills fell in Monday's auction with rates on three-month bills dropping to the lowest level in a year.

The Treasury Department auctioned $30 billion in three-month bills at a discount rate of 0.040 percent, down from 0.050 percent last week. Another $31 billion in six-month bills was auctioned at a discount rate of 0.160 percent, down from 0.165 percent last week.

The three-month rate was the lowest since these bills averaged 0.005 percent on Dec. 8, 2008. The six-month rate was the lowest since 0.150 percent on Nov. 30.

Rates on short-term Treasury securities have been near historic lows for much of the past year, reflecting the Federal Reserve's efforts to keep interest rates low to strengthen the struggling economy.

Fed policymakers were scheduled to hold their final meeting of 2009 this week. Analysts expect they will keep a key short-term rate, the federal funds rate, near a record low of 0 percent.

The funds rate was cut to that level a year ago at the end of an aggressive period of rate cutting as the central bank tried to contain the damage from last year's financial crisis.

The discount rates on Treasury bills reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,998.99 while a six-month bill sold for $9,991.19. That would equal an annualized rate of 0.041 percent for the three-month bills and 0.162 percent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, rose to 0.32 percent last week from 0.29 percent the previous week.