BANKING & FINANCE - May 21, 1996

Rates Mixed on Short-Term T-Bills: The Treasury Department sold $13.7 billion in three-month bills at an average discount rate of 5.03%, up from 5.02% last week. An additional $13.6 billion was sold in six-month bills at an average discount rate of 5.11%, down from 5.14%. The three-month rate is the highest since they sold for 5.07% on April 1. The six-month rate is the lowest since they averaged 5.08% on April 29. The new discount rates understate the actual return to investors: 5.16% for a three-month bill, with a $10,000 bill selling for $9,872.90, and 5.32% for a six-month bill selling for $9,741.70. The Treasury has scheduled auctions of two-year notes for May 29 and five-year notes for May 30. In a separate report, the Federal Reserve said the average yield for one-year Treasury bills, the most popular index for making changes in adjustable-rate mortgages, fell to 5.59% last week from 5.67% the previous week.