Rates plunge at weekly Treasury auction

AP News
Posted: Aug 22, 2011 7:28 PM
Rates plunge at weekly Treasury auction

Interest rates on short-term Treasury bills plunged in Monday's auction with the rate on six-month bills marking the lowest level on record.

The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.015 percent, down from 0.035 percent last week. Another $27 billion in six-month bills was auctioned at a discount rate of 0.045 percent, down from 0.080 percent last week and the lowest rate ever, according to Treasury.

The three-month rate was the lowest since three-month bills averaged 0.005 percent on Dec. 8, 2008, during the financial crisis.

Rates on Treasury securities have remained at low levels in recent weeks even after credit rating agency Standard & Poor's lowered its rating on long-term Treasury debt by one notch from AAA to AA+ on Aug. 5.

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 $9,999.61. A six-month bill sold for $9,997.72. That would equal an annualized rate of 0.015 percent for the three-month bills and 0.046 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, was 0.11 percent last week, unchanged from the previous week.