Rates Fall on Short-Term Treasuries

The Treasury Department sold $14.1 billion in three-month bills at an average discount rate of 4.98%, down from 5.03% last week and the lowest since they sold for 4.96% on Oct. 7. Another $14.1 billion was sold in six-month bills at an average rate of 5.04%, down from 5.07% and the lowest since they averaged 5.02% on April 22. The new discount rates understate the actual return to investors--5.11% for three-month bills with a $10,000 bill selling for $9,874.10, and 5.24% for a six-month bill selling for $9,745.20. Separately, the Federal Reserve Board said the average yield for one-year Treasury bills, the most popular index for making changes in adjustable-rate mortgages, fell to 5.41% last week from 5.42% the previous week. The next auction of two-year notes is Dec. 18, and five-year notes sell on Dec. 19.