Rates on Treasury bills fall, 6-month bills hit record low for second straight week

Rate on 6-month Treasury bill hits new record low

WASHINGTON — Interest rates on six-month Treasury bills hit a record low for the second consecutive week.

The Treasury Department on Tuesday auctioned $29 billion in six-month bills at a discount rate of 0.225 percent. That was down from last week’s record of 0.240 percent. The government started issuing these bills weekly in December 1958.

Another $29 billion in three-month bills were auctioned at a discount rate of 0.140 percent, down from 0.150 percent last week. That’s the lowest point for three-month bills since 0.135 percent on April 27. The auction was delayed by a day because of the Labor Day holiday.

Rates on three- and six-month bills have been moving in a narrow band below 1 percent for months, reflecting a campaign by the Federal Reserve to push down short-term borrowing costs, breathe life into the economy and get the country out of the longest recession since World War II.

In December, the Fed slashed its target for the federal funds rate, the interest that banks charge each other on overnight loans, to an all-time low of zero to 0.25 percent. At its last meeting on Aug. 12, the Fed continued to leave the funds rate unchanged and repeated a pledge to leave rates low for an extended period.

Many private economists don’t expect the Fed to start raising rates for at least the next 12 months. They believe the central bank will not start to tighten credit conditions until the unemployment rate starts falling.

The government reported last week that the jobless rate rose in August to 26-year high of 9.7 percent. Many private analysts expect that rate will top 10 percent in coming months.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,996.46, while a six-month bill sold for $9,988.63. That would equal an annualized rate of 0.142 percent for the three-month bills, and 0.228 percent for the six-month bills.

Separately, the Fed said Tuesday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, fell to 0.42 percent last week from 0.45 percent the previous week.