Rates climb at weekly US Treasury bill auction; rate on 3-month bill highest since early 2009

WASHINGTON – Interest rates on short-term Treasury bills climbed in Monday’s auction as investors anticipate an interest rate increase by the Federal Reserve next week. The rate on the three-month Treasury bill reached its highest level since February 2009, while the six-month bill rate was the highest since November 2008.

The Treasury Department auctioned $28 billion in three-month bills at a discount rate of 0.280 per cent, up from 0.215 per cent last week. Another $26 billion in six-month bills was auctioned at a discount rate of 0.535 per cent, up from 0.415 per cent last week.

Rates on government bonds have climbed in recent weeks amid investors’ expectations that the Fed will raise its key short-term interest rate — now at a record low near zero — at a policymaking meeting next Tuesday and Wednesday. The Fed hasn’t raised rates since June 2006.

Government data issued Friday showed that the U.S. economy added 211,000 jobs in November, more than investors had expected. The data cemented expectations of a Fed rate increase.

The three-month rate at Monday’s auction was the highest since three-month bills averaged 0.300 per cent on Feb. 23, 2009. The six-month rate was the highest since those bills averaged 0.840 per cent on Nov. 17, 2008.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,992.92, while a six-month bill sold for $9,972.95. That would equal an annualized rate of 0.285 per cent for the three-month bills and 0.545 per cent 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 0.54 per cent last week from 0.51 per cent the previous week.