Rates mixed at weekly Treasury auction

AP News
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Posted: Aug 15, 2011 3:40 PM
Rates mixed at weekly Treasury auction

Interest rates on short-term Treasury bills were mixed in Monday's auction. Three-month bills fell to the lowest level in four weeks while the rate on six-month bills increased slightly.

The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.035 percent, down from 0.045 percent last week. Another $27 billion in six-month bills was auctioned at a discount rate of 0.080 percent, up from 0.065 percent last week.

The three-month rate was the lowest since three-month bills averaged 0.020 percent four weeks ago on July 18. The six-month rate was the highest since these bills averaged 0.150 percent two weeks ago on Aug. 1.

Rates on Treasury securities have remained at low levels despite tense negotiations that nearly brought the U.S. government to the brink of default. Congress approved an increase to the nation's $14.3 trillion borrowing limit only hours before an Aug. 2 deadline.

The deal did not stop credit rating agency Standard & Poor's from lowering its rating on long-term Treasury debt by one notch from AAA to AA+ on Aug. 5. Still, the downgrade has yet to shake investors' appetite for Treasury debt.

The discount rates on the Treasury bills auctioned Monday reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,999.12. A six-month bill sold for $9,995.96. That would equal an annualized rate of 0.036 percent for the three-month bills and 0.081 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 0.11 percent last week from 0.16 percent the previous week.