BANKING & FINANCE - July 9, 1996

Rates Rise on Short-Term T-Bills: Interest rates on six-month bills climbed to the highest level in nearly a year at auction. The Treasury Department sold $14.6 billion in three-month bills at an average discount rate of 5.21%, up from 5.12% last week. An additional $14.6 billion was sold in six-month bills at an average rate of 5.41%, up from 5.22%. The three-month bill’s rate was the highest since they sold for 5.30% on Dec. 11. The six-month rate was the highest since they averaged 5.43% last Aug. 21. The new discount rates understate the actual return to investors: 5.35% for three-month bills, with a $10,000 bill selling for $9,868.30, and 5.64% for a six-month bill selling for $9,726.50. In a separate report, the Federal Reserve Board said the average yield for one-year T-bills rose to 5.82% last week from 5.79% the previous week. Ten-year Treasury notes will be auctioned today. The next auction of two-year notes will be July 23, July 24 for five-year notes.