Interest Rates Fall to Lowest Level in 7 Years

Interest rates on short-term Treasury securities fell at auction to their lowest level in seven years. The Treasury Department sold $9 billion in three-month bills at a discount rate of 3.820%, down from 4.125% last week. An additional $8 billion was sold in six-month bills at a rate of 3.815%, down from 4.020%. The three-month rate was the lowest since April 18, 1994, when the bills sold for 3.760%. The six-month rate was the lowest since March 7, 1994, when the rate was 3.750%. The new discount rates understate the actual return to investors--3.912% or three-month bills with a $10,000 bill selling for $9,903.40 and 3.945% for a six-month bill selling for $9,807.10. In a separate report, the Federal Reserve said the average yield for one-year constant maturity Treasury bills, the most popular index for making changes in adjustable rate mortgages, fell to 4% last week from 4.19%.