Constant Maturity Treasuries (CMT) Explained:

Constant Maturity Treasuries are a set of theoretical securities based on recently auctioned "real" securities. (1-, 3-, 6-month bills, 2-, 3-, 5-, 10-, 30-year notes) and also notes in the 7- to 20-year maturity range. Constant Maturity Treasury rates are also known as Treasury Yield Curve Rates.

Yields on Treasury securities at constant maturity are interpolated by the U.S. Treasury from the daily yield curve, which is based on the closing market bid yields on actively traded treasury securities in the OTC market. (Over-the-counter market)

The CMT indexes are volatile and move with the market. They reflect the current state of the economy and respond rapidly to sudden economic change. CMT indexes react more slowly than the CD index, but more quickly than the COFI index or the MTA index

This index (CMT) is an average yield on United States Treasury securities adjusted to a constant maturity of 1 year. Yields are interpolated by the United States Treasury from the daily yield curve. This curve (daily yield) relates the yield on a security to its time to maturity. This yield is based on closing market bid yields on actively traded treasury securities in the OTC (over-the-counter) market.

What does the one-year CMT mean for a mortgage borrower?

The U.S. Treasury publishes the one-year CMT value on a daily basis. Official weekly, monthly and annual one-year CMT values are published respectively. The monthly one year CMT value forms a popular mortgage index to which many fixed period or hybrid adjustable rate mortgages (ARMs) are attached to. Some mortgages such as pay-option ARMs offer the borrower a choice of indexes. Different indexes have relative values which historically are quite constant within a certain range.