Rates on short-term Treasury bills rise; highest since 2008

Interest rates on short-term Treasury bills rose in Monday's auction to their highest levels in more than nine years.

The Treasury Department auctioned $48 billion in three-month bills at a discount rate of 1.830 percent, up from 1.760 percent last week. Another $42 billion in six-month bills was auctioned at a discount rate of 1.985 percent, up from 1.945 percent last week.

A recent spike in commodity prices has lifted inflation expectations, and with them the interest rates on Treasury securities. The yield on the benchmark 10-year Treasury note on Monday reached its highest level since January 2014, brushing 3 percent at 2.99 percent. The 10-year rate is tied to auto loans, mortgages and other credit, and breaching the key 3 percent level could send financial shock waves.

The three-month rate at Monday's auction was the highest since those bills averaged 1.850 percent on Aug. 18, 2008, shortly before the onset of the financial crisis. The six-month rate was the highest since those bills averaged 2.020 percent on Aug. 11, 2008.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,953.74 while a six-month bill sold for $9,899.65. That would equal an annualized rate of 1.864 percent for the three-month bills and 2.033 percent 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, stood at 2.22 percent on Friday, up from 2.12 percent at the beginning of last week on April 16.