Rates rise at weekly Treasury auction

AP News
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Posted: May 16, 2011 7:07 PM
Rates rise at weekly Treasury auction

Interest rates on short-term Treasury bills rose in Monday's auction but still remain close to historic lows.

The Treasury Department auctioned $27 billion in three-month bills at a discount rate of 0.030 percent, up from 0.025 percent last week. Another $24 billion was auctioned in six-month bills at a discount rate of 0.070 percent, up from 0.065 percent last week.

The auction on Monday came as the government hit its current borrowing limit of $14.3 trillion. Treasury Secretary Timothy Geithner told Congress in a letter that he will begin removing investments from two government employee pension funds to clear room to continue with regular debt auctions. However, he has warned that by around Aug. 2 he will exhaust the bookkeeping maneuvers he can take.

The three-month rate Monday was the highest since three-month bills averaged 0.050 percent two weeks ago. The six-month rate was the highest since these bills averaged 0.100 percent, also on May 2.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,999.24 while a six-month bill sold for $9,996.46. That would equal an annualized rate of 0.031 percent for the three-month bills and 0.071 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, fell to 0.18 percent last week from 0.20 percent the previous week.