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Rates soar at weekly auction of 3-month and 6-month Treasury bills; 3-month highest since 2011


WASHINGTON — Interest rates on short-term Treasury bills soared in Monday's auction. The rate on the three-month bill reached its highest level since early 2011, while the six-month rate was the highest it's been since mid-2009.

The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.135 percent, up from 0.11 percent last week. Another $27 billion in six-month bills was auctioned at a discount rate of 0.340 percent, up from 0.280 percent last week.

Rates on government bonds have been climbing amid expectations that the Federal Reserve may soon raise its key short-term interest rate. While it kept the rate at a record low near zero, the Fed recently signaled the possibility a rate hike could come at its next meeting in December. An unexpectedly strong employment report for October, released by the government Friday, amplified those expectations.

The market speculation on rates has brought plunging government bond prices and soaring yields, which rise as prices fall.

The three-month rate at Monday's auction was the highest since the bills averaged 0.145 percent in February 2011. The six-month rate was the highest since those bills averaged 0.350 percent in June 2009.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,996.59, while a six-month bill sold for $9,982.81 That would equal an annualized rate of 0.137 percent for the three-month bills and 0.346 percent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, jumped to 0.41 percent last week from 0.31 percent in the previous week.

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