Short-Term T-Bill Rates Hit 4 1/2-Year Low

Interest rates on short-term Treasury securities fell in auction to the lowest level in 4 1/2 years. The Treasury Department sold $8 billion in three-month bills at an average discount rate of 3.85%, down from 3.905% last week. An additional $8 billion was sold in six-month bills at an average rate of 3.865%, down from 4.09%. The three-month rate was the lowest since April 18, 1994, when the bills sold for 3.76%. The six-month rate was the lowest since March 28, 1994, when the average was 3.85%. The new discount rates understate the actual return to investors--3.941% for three-month bills, with a $10,000 bill selling for $9,902.70, and 3.997% for a six-month bill selling for $9,804.60. In a separate report, 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 4.14% last week from 4.18% the previous week. The next auction of two-year notes will be Oct. 28.