Rates mixed at weekly auction of 3-month, 6-month Treasury bills; 3-month highest since 2011

WASHINGTON – Interest rates on short-term Treasury bills were mixed in Monday’s auction after soaring the previous week. The rate on the three-month bill rose to its highest level since early 2011, while the six-month rate slipped to its lowest level since early this month.

The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.145 per cent, up from 0.135 per cent last week. Another $27 billion in six-month bills was auctioned at a discount rate of 0.330 per cent, down from 0.340 per cent last week.

Rates on government bonds have climbed in recent weeks amid expectations that the Federal Reserve may soon raise its key short-term interest rate. While keeping the rate at a record low near zero, the Fed recently signalled the possibility a hike could come at its next meeting in December. An unexpectedly strong employment report for October amplified those expectations.

On the other hand, there was some speculation among investors Monday that Friday’s terrorist attacks in Paris could have a negative economic impact that might lead the Fed to hold off on raising rates.

The falling government bond prices have brought soaring yields, which rise as prices fall.

The three-month rate at Monday’s auction was the highest since the bills averaged 0.150 per cent on Feb. 7, 2011. By contrast, the six-month rate was the lowest since those bills averaged 0.280 per cent on Nov. 2.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,996.33, while a six-month bill sold for $9,983.32. That would equal an annualized rate of 0.147 per cent for the three-month bills and 0.336 per cent 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, increased to 0.50 per cent last week from 0.41 per cent in the previous week.