Interest rates on short-term T-bills rose sharply.

The Treasury Department sold $7 billion in new three-month bills at an average discount rate of 5.44%, up from 5.23% last week. Another $7 billion was sold in new six-month bills at an average discount rate of 5.43%, up from 5.27% last week. The rates were the highest since Jan. 5, when three-month bills averaged 5.53% and six-month bills sold for 5.55%. The new discount rates understate the actual return to investors: 5.59% for three-month bills, with a $10,000 bill selling for $9,862.50, and 5.66% for six-month bills selling for $9,725.50. The discount rate reflects the price discount received when government securities are purchased at less than face value.