Rates dip slightly at weekly Treasury auction

AP News
Posted: Jan 04, 2010 3:04 PM

Interest rates on short-term Treasury bills fell in Monday's auction to the lowest levels in two weeks.

The Treasury Department auctioned $25 billion in three-month bills at a discount rate of 0.080 percent, down from 0.110 percent last week. Another $26 billion in six-month bills was auctioned at a discount rate of 0.180 percent, down from 0.200 percent last week.

The three-month rate was the lowest since three-month bills averaged 0.070 percent two weeks ago on Dec. 21. The six-month rate was the lowest since 0.170 percent, also on Dec. 21.

Rates on three- and six-month Treasury bills have been at historic lows for more than a year, reflecting the Federal Reserve's efforts to keep interest rates low to strengthen the struggling economy.

At its last meeting on Dec. 16, the Fed once again voted to keep its target for overnight bank loans at a record low near zero, where it has been since December 2008.

The Fed pledged to hold rates at low levels for an "extended period" to nurture the fledgling economic recovery. Many economists believe that the central bank will not begin raising rates until the middle of this year at the earliest.

The discount rates reflect that the Treasury bills sell for less than face value. For a $10,000 bill, the three-month price was $9,997.98 while a six-month bill sold for $9,990.90. That would equal an annualized rate of 0.081 percent for the three-month bills and 0.183 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 0.47 percent last week from 0.41 percent the previous week.