Interest rates on short-term T-bills rose sharply.

The Treasury Department sold $7 billion in new three-month bills at an average discount rate of 6.22%, up from 6.07% last week. Another $7 billion in new six-month bills was sold at an average discount rate of 6.28%, up from 6.10% last week. The new discount rates understate the actual return to investors--6.41% for three-month bills and 6.58% for six-month bills. The discount rate reflects the price discount received when government securities are purchased at less than face value. In a separate report, the Federal Reserve said the average yield for one-year Treasury bills was 6.65% last week, up from 6.49% the previous week.