Rates rise at weekly Treasury auction

AP News
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Posted: May 23, 2011 4:20 PM
Rates rise at weekly Treasury auction

Interest rates on short-term Treasury bills rose in Monday's auction for the second straight week.

The Treasury Department auctioned $27 billion in three-month bills at a discount rate of 0.055 percent, up from 0.030 percent last week. Another $24 billion was auctioned in six-month bills at a discount rate of 0.1 percent, up from 0.070 percent last week.

The government has hit its current borrowing limit of $14.3 trillion. Last week Treasury Secretary Timothy Geithner told Congress in a letter that he will remove 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 0.065 percent on April 25. The six-month rate was the highest since these bills averaged 0.115 percent, also on April 25.

The discount rates indicate that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,998.61 while a six-month bill sold for $9,994.92. That would equal an annualized rate of 0.056 percent for the three-month bills and 0.102 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 0.19 percent last week from 0.18 percent the previous week.