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CMT Rate: How It Affects Your Mortgage Rate

Scott Steinberg4-minute read

June 07, 2021


The Constant Maturity Treasury (CMT) rate and U.S. Treasury play a key role in determining the mortgage interest rates that are associated with your adjustable-rate mortgage (ARM). Understanding how CMT rates can raise or lower your home interest rates can help you budget more effectively and better plan for monthly expenses, including the purchase of a new or existing home.

What Is The Constant Maturity Treasury (CMT) Rate?

Treasury securities – including U.S. Treasury bills (T-bills), U.S. Treasury notes (T-notes), and U.S. Treasury bonds (T-bonds) – are government debt obligations that are backed by the federal government. Holders of these treasury securities (investors), which can be bought and sold on primary and secondary markets, receive payments in exchange for the monies that they pay to secure them.

T-bills are short-term debts that mature in under a year and are largely viewed as low-risk investments. The longer it takes for the T-bill to mature, the more you can expect to be paid in interest as a return on your investment.

T-notes are government-secured debts with a fixed interest rate and a term of maturity that sits somewhere between 2 – 10 years. Owners of T-notes receive payments on their holdings at 6-month intervals until such time as the T-note matures.

T-bonds by contrast are fixed-rate government debt securities whose maturity period ranges from 10 – 30 years in length. As a general rule, T-bonds pay investors in the form of semiannual interest payments until such time as these investments mature, at which time the owner of the T-bond can expect to be paid the bond’s face value.

Noting all of this, the Constant Maturity Treasury rate refers to a computed yield that is derived by taking the average yield of different types of Treasury securities that are set to mature at different times and using it to adjust for a number of time periods. It’s typically presented to observers in the form of an index that is provided by the government-backed Federal Reserve Board to demonstrate to prospective Treasury security purchasers what kind of average yield that they can expect to enjoy on investments made in these debt securities.

Perhaps the easiest way to think of the CMT rate is as a current snapshot that reveals – based on trends in currently traded securities – how much value that the ownership of different types of Treasury securities might ultimately produce if you elect to invest in them.

Calculating The 1-Year CMT Rate

CMT rates are calculated by first determining the Treasury Yield Curve rate (which compares and contrasts short-term T-bill yields against long-term investments such as T-notes and T-bonds) that corresponds to any given Treasury security, then averaging the past week’s or past month’s daily rates that map to the appropriate Constant Maturity Treasury.

In other words, the CMT rate presents to viewers the current hypothetical value of the worth of a U.S. Treasury security – one that’s been determined from data on the values of U.S. Treasuries that have been recently auctioned.

More often than not, when you encounter references to CMT rate, you can expect to see these figures expressed in the form of the 1-year CMT. It’s a measure of value that is designed to illustrate the one-year yield equivalent (how much you might expect to earn in interest from these investments each year) of the most recently auctioned Treasury securities. CMT rates may also be expressed in the form of 3-, 5- and 10-year equivalents.

Lenders look to these calculations as a barometer by which they set and adjust home mortgage interest rates on variable-rate loans and other adjustable-rate loan products as economic conditions shift. In effect, if CMT rates change, the amount of interest that you can expect to pay each month and over the lifetime of your home loan can change as well.

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How The CMT Index Affects Mortgage Rates

For simplicity’s sake, think of the CMT Index as a reference point that financial lenders (banks, credit unions, online lenders, etc.) look to as they aim to set the cost of variable-rate loans, such as adjustable-rate mortgages. As market conditions change, so too do lenders adjust the interest rate charged on these home mortgage products.

When determining how much to charge borrowers, variable-rate lenders will first determine a mortgage interest rate based on CMT, then add additional percentage points (their margin) to determine how much you’ll ultimately pay for the loan. Your individual risk profile, credit history, and other factors may also impact the mortgage interest rate available to you. As a general rule of thumb though, when the CMT index goes up, any loans that are tied to it – ARMs and other variable-rate products – also tend to increase their interest rates as well.

As you go about considering whether to use CMT rates or other benchmarks when determining how to make an informed mortgage or refinance decision, you will wish to consider countrywide economic factors, the global geopolitical environment, the current state of the real estate and housing industry, and any other considerations that may impact the market’s current and future operating outlook.

The Bottom Line: Look At CMT Rates Today Before Signing An ARM

CMT rates can have a marked effect on adjustable-rate mortgages and other variable-rate home loan products, making the Constant Maturity Treasury rate a factor that you should be aware of before applying to obtain one.

As CMT rates rise, so too can the mortgage interest rates that you are expected to pay on a monthly and annual basis – and the total amount that that you might anticipate to come out of pocket when it comes to budgeting for your bills and expenses.

Curious about what other factors impact your mortgage rates? We don’t blame you, as your interest rate isn’t entirely subject to U.S. Treasury yields either. To learn more about how home mortgage interest rates are calculated and computed, or how to get the best mortgage rate possible, be sure to explore our Learning Center.

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Scott Steinberg

Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. A strategic adviser to four-star generals and a who’s-who of Fortune 500s, he’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD. The CEO of BIZDEV: The Intl. Association for Business Development and Strategic Planning™, his website is