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Rates on US Treasury bills fall with 3-month bill dropping to record low of zero percent


WASHINGTON — Interest rates on short-term Treasury bills fell in Monday's auction with rates on three-month bills dropping to the lowest level on record.

The Treasury Department auctioned $21 billion in three-month bills at a discount rate of zero percent, down from 0.015 percent last week. Another $21 billion in six-month bills was auctioned at a discount rate of 0.065 percent, down from 0.105 percent last week.

Short-term rates have been at ultra-low levels for a number of years, reflecting efforts by the Federal Reserve to boost the economy by pushing borrowing rates down. The Fed's key benchmark rate has been at a record low near zero since December 2008.

This week's three-month rate of zero percent means that the government was able to auction $21 billion in short-term securities to investors who were willing to loan money to the government for three months without getting any return on the investment. The 0.065 percent rate for the six-month bill was the lowest since these bills averaged 0.060 percent on Nov. 10 of last year.

The discount rates reflect that the bills usually sell for less than face value. The three-month price for a $10,000 bill was $10,000, showing that the buyers are earning no interest on those bills. The six-month price for a $10,000 bill was $9,996.71.

At those prices, the annualized rate of return for a three-month bill was zero, while the rate of return for a six-month bill was 0.066 percent.

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, dipped to 0.31 percent last week from 0.34 percent the previous week.

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