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Interest rates on short-term Treasury securities fell in Monday's auction to their lowest level in more than two years.

The Treasury Department sold $10.1 billion in three-month bills at an average discount rate of 6.86 percent, down from 7.06 percent last week. Another $10 billion was sold in six-month bills at an average discount rate of 6.74 percent, down from 6.96 percent last week.

The new discount rates understate the actual return to investors -- 7.08 percent for three-month bills with a $10,000 bill selling for $9,826.60, and 7.07 percent for a six-month bill selling for $9,659.30.

In a separate report, the Federal Reserve said the average yield for one-year Treasury bills, the most popular index for adjustable rate mortgages, fell to 7.24 percent last week from 7.30 percent the previous week.

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