BANKING & FINANCE - Oct. 16, 1996

Rates Rise on Short-Term T-Bills: Interest rates on short-term Treasury securities rose in Tuesday’s auction to the highest level in several weeks. The Treasury Department sold $13 billion in three-month bills at an average discount rate of 5.01%, up from 4.96% last week. Another $13 billion was sold in six-month bills at an average rate of 5.11%, up from 5.07%. The three-month bill rate was the highest since they sold for 5.18% on Sept. 23. The six-month bill rate was the highest since they averaged 5.17% on Sept. 30. The new discount rates understate the actual return to investors: 5.14% for three-month bills, with a $10,000 bill selling for $9,873.40, and 5.32% for a six-month bill selling for $9,741.70. In a separate report, the Federal Reserve said the average yield on one-year Treasury bills, the most popular index for making changes in adjustable-rate mortgages, fell to 5.57% last week from 5.61% the previous week.