Interest rates on short-term Treasury bills plunged.

The Treasury Department sold $7 billion in new three-month bills at an average discount rate of 6.35%, down from 6.36% last week. Another $7 billion was sold in new six-month bills at an average discount rate of 6.32%, down from 6.43% last week. The rates were the lowest since three-month bills averaged 6.32% on May 15, 1978, and six-month bills sold for 6.29% on Oct. 3, 1977. The new discount rates understate the actual return to investors--6.54% for three-month bills and 6.62% for six-month bills--and reflect the price discounts received when T-bills are purchased at less than face value.