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Weekly auction of US Treasury bills shows 6-month bills rising to highest level in 7 years

WASHINGTON – Interest rates on short-term Treasury bills were mixed in Monday’s auction with rates on three-month bills unchanged while those on six-month bills rose to their highest level since late 2008, during the financial crisis.

The Treasury Department auctioned $28 billion in three-month bills at a discount rate of 0.280 per cent, unchanged from last week. Another $26 billion in six-month bills was auctioned at a discount rate of 0.585 per cent, up from 0.535 per cent last week.

The six-month rate was the highest since those bills averaged 0.840 per cent seven years ago on Nov. 17, 2008, a time when the country was facing a deep recession and the worst financial crisis in seven decades. Since then, the Federal Reserve has kept interest rates at record lows in an effort to jump-start economic growth. But economists believe the Fed will likely raise its key benchmark rate at this week’s meeting of its policy-setting board.

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 $9,992.92, while a six-month bill sold for $9,970.43. That would equal an annualized rate of 0.285 per cent for the three-month bills and 0.597 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 0.71 per cent last week from 0.54 per cent the previous week.