Interest rates on $100 million of bonds issued by the Port Authority of New York and New Jersey were set at 8% in a weekly auction after surging to 20% on February 12.

Rates had soared from 4.3% when too few buyers bid for the so-called auction-rate debt and Goldman Sachs Group Inc., which handled the auction, refused to put up its own capital to buy unwanted securities. That caused the yield to be set at a level predetermined in bond documents. Rates fell yesterday as the prospect of high yields enticed investors, according to data compiled by Bloomberg.

Rates in the more than $300 billion market for auction debt are rising, increasing borrowing costs for taxpayers, after banks including Citigroup Inc. and Goldman stopped bidding for the debt at periodic sales they oversee, prompting hundreds of so-called failures. Some investors, including Oppenheimer Funds Inc., see opportunity in the turmoil and are buying the bonds. “Twenty percent was such an unusually high number,” the director of credit research at Samson Capital Advisors LLC, a fixed-income manager in New York, Judy Wesalo Temel, said. “I wouldn’t say that the whole market has calmed down or has even begun to function normally yet. It hasn’t.”

Yesterday, a Citigroup-run auction of $25 million of federally taxable debt issued by Vermont’s student loan agency failed, causing the rate to remain at 18% for the second week in a row. The debt paid 4.5% as recently as February 11.

The 8% rate on the federally taxable Port Authority debt, which carries an A+ credit rating and is insured by MBIA Inc., is still above the range of 4% to 5.70% the agency paid until this month. The interest payment for the current weekly auction was $155,555 down from $388,888 the prior.