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T-bill rates highest since '01

WASHINGTON -- Interest rates on short-term Treasury bills rose in yesterday's auction to the highest levels in 3½ years.

The Treasury Department auctioned $20 billion in three-month bills at a discount rate of 2.800 percent, up from 2.735 percent last week. Another $18 billion in six-month bills was auctioned at a discount rate of 3.035 percent, up from 3.000 percent last week.

The rates were the highest since Sept. 10, 2001, when the three-month bill was 3.180 percent and the six-month bill was 3.120 percent.

The new discount rates understate the actual return to investors: 2.859 percent for three-month bills, with a $10,000 bill selling for $9,929.22, and 3.125 percent for a six-month bill selling for $9,846.56.

Separately, the Federal Reserve said the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, rose to 3.31 percent last week, from 3.24 percent the previous week.

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