US Treasury bill rates flat to higher; 3-month at 0 percent

AP News
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Posted: Oct 13, 2015 4:12 PM

WASHINGTON (AP) — Interest rates on short-term Treasury bills were unchanged to higher in Tuesday's auction. The rate on three-month bills remained at the lowest level on record and the rate on six-month bills reached their highest level since late September.

The Treasury Department auctioned $20 billion in three-month bills at a discount rate of zero percent, unchanged from last week. Another $20 billion in six-month bills was auctioned at a discount rate of 0.080 percent, up from 0.065 percent last week.

Because of the Columbus Day holiday on Monday that closed federal government agencies, this week's auction was held Tuesday.

Short-term rates have been at ultra-low levels for a number of years, reflecting efforts by the Federal Reserve to boost the economy by pushing borrowing rates down. The Fed's key benchmark rate has been at a record low near zero since December 2008.

This week's continued three-month rate of zero percent means the government was able to auction $20 billion in short-term securities to investors who were willing to loan money to the government for three months without getting any return on the investment. The 0.080 percent rate for the six-month bill was the highest since those bills averaged 0.105 percent on Sept. 28.

The discount rates reflect that the bills usually sell for less than face value. The three-month price for a $10,000 bill was $10,000, showing that the buyers are earning no interest on those bills. The six-month price for a $10,000 bill was $9,995.95.

At those prices, the annualized rate of return for a three-month bill was zero, while the rate of return for a six-month bill was 0.081 percent.

Separately, the Federal Reserve said Tuesday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, fell to 0.27 percent last week from 0.31 percent the previous week.