Interest rates on short-term Treasury bills fell in Monday's auction, dropping to the lowest levels in three weeks.
The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.045 percent, down from 0.115 percent last week. Another $27 billion in six-month bills was auctioned at a discount rate of 0.065 percent, down from 0.150 percent last week.
The Monday auction was the first to take place since the Standard & Poor's credit rating agency lowered its rating on long-term Treasury debt late Friday by one notch to AA+. The rating agency left unchanged at the highest level of AAA its rating on three-month and six-month Treasury bills and all government securities with a maturity of one year or less.
The three-month rate Monday was the lowest since three-month bills averaged 0.020 three weeks ago on July 18. That rate was the lowest for three-month bills since they hit a record low of 0.005 percent in December 2008 as investors fled to the safety of Treasury securities during the financial crisis.
The six-month rate Monday was the lowest since July 18 when these bills averaged 0.060 percent, a record low.
Rates on Treasury securities have remained at low levels even as the government faced the prospect of a possible default on its debt until the impasse over raising the borrowing ceiling was resolved last week. Analysts saw the low rates as evidence that investors still see U.S. government debt as safe even after the long-term debt was downgraded by S&P.
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 $9,998.86 while a six-month bill sold for $9,996.71. That would equal an annualized rate of 0.046 percent for the three-month bills and 0.066 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, dipped slightly to 0.16 percent last week from 0.21 percent the previous week.