Short-term T-bill rates fall sharply

Uncle Sam paid much less to borrow at Monday’s weekly Treasury bill auction than a week earlier, as nervous investors sought a place to hide.

The Treasury auctioned $21 billion in three-month bills at a discount rate of 2.850%, down from 4.630% last week. An additional $17 billion in six-month bills was auctioned at a discount rate of 3.950%, down from 4.710% last week.

The new discount rates understate the actual return to investors -- 2.919% for the three-month bills, with a $10,000 bill selling for $9,927.17, and 4.098% for a six-month bill selling for $9,800.31.

Separately, the Federal Reserve said the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, plunged to 4.44% last week, down from 4.78% the previous week.