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Interest rates on short-term Treasury securities fell in Monday's auction to the lowest levels since late last year. The Treasury Department sold $13.7-billion in three-month bills at an average discount rate of 5.35 percent, down from 5.46 percent last week. An additional $13.7-billion was sold in six-month bills at an average discount rate of 5.34 percent, down from 5.42 percent. The rates understate the actual return to investors _ 5.51 percent for three-month bills with a $10,000 bill selling for $9,864.80 and 5.58 percent for a six-month bill selling for $9,730.00. The Federal Reserve said the average yield for one-year Treasury bills fell to 5.59 percent last week from 5.66 percent the previous week.

ESCAMBIA SELLS ITS RISKY INVESTMENTS. Officials in Escambia County said Monday that the county has sold all its risky derivative securities to brokerage firms for a total of $24.7-million, a 36 percent loss, in the past 45 days. The loss, on a $38.7-million book value, was smaller than the 58 percent loss that county comptroller Jim Moye had predicted last month, according to Bloomberg Business News. Former Escambia treasurer Joseph Flowers is scheduled to go to trial Sept. 5 on charges that he bought derivatives without authorization. The county also has filed suit against four brokerage firms for selling it the securities.

FORD TO TEST "SMOG EATER.' Ford Motor Co. plans to test a promising new radiator-catalyst system that its creator says could make cars and trucks "pollution eaters" instead of smog makers. Inventor Engelhard Corp. hopes to sell the system as a gasoline-powered alternative to more costly electric and natural gas-powered cars automakers are developing to meet new pollution standards. If the tests over the next nine months prove successful, the system could be available to reduce smog in some cities as early as 1998, a Ford executive said.

KMART TO SELL OFFICEMAX STAKE. Kmart Corp. said it will sell its 25 percent stake in OfficeMax Inc., which could generate about $347.9-million for the discount retailer. Kmart spokesman Orren Knauer said OfficeMax had asked Kmart to sell because OfficeMax believed Kmart's holding was depressing its stock price. OfficeMax plans to sell additional shares, raising $47.2-million to $106.4-million. The office-products retailer said it will use the money to speed up its expansion and store renovations.