Yields Drop on Short-Term Treasuries

The Treasury Department sold $5.78 billion in three-month bills at an average discount rate of 4.74%, down from 4.79% last week. An additional $7.27 billion was sold in six-month bills at an average rate of 4.75%, down from 4.79%. The three-month rate is the lowest since Sept. 19, 1994, when the bills sold for 4.61%. The six-month rate is the lowest since Feb. 20, 1996, when the average was 4.75%. The new discount rates understate the actual return to investors--4.86% for three-month bills, with a $10,000 bill selling for $9,880.20, and 4.94% for a six-month bill selling for $9,759.60. In a separate report, the Federal Reserve Board said the average yield for one-year Treasury bills, the most popular index for making changes in adjustable-rate mortgages, fell to 4.76% last week from 4.91% the previous week.