Interest rates on short-term T-bills dropped.

The Treasury Department sold $7 billion in new three-month bills at an average discount rate of 6.31%, down from 6.33% last week. Another $7 billion was sold in new six-month bills at an average discount rate of 6.39%, down from 6.41% last week. The new discount rates understate the actual return to investors--6.50% for three-month bills and 6.69% for six-month bills. The discount rate reflects the price discount received when government securities are purchased at less than face value. In a separate report, the Federal Reserve said the average yield for one-year Treasury bills was 7% last week, up from 6.79% the previous week.