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Interest rates on short-term Treasury bills fell in Monday's auction with rates on three-month bills dropping for a second consecutive week.

The Treasury Department auctioned $18 billion in three-month bills at a discount rate of 2.735 percent, down from 2.780 percent last week.

Another $16 billion in six-month bills was auctioned at a discount rate of 3.035 percent, down from 3.090 percent last week.

The new discount rates understate the actual return to investors -- 2.792 percent for three-month bills with a $10,000 bill selling for $9,930.87, and 3.125 percent for a six-month bill selling for $9,846.56.

In a separate report, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, remained unchanged at 3.38 percent this week.