One of the more volatile families of indexes which are used in ARM adjustable rate mortgages, CMT indexes are closely linked to the current economic climate in the United States. CMT Indexes measure the monthly or even weekly average yields of United States Treasury securities adjusted to a constant maturity. Also known as Treasury Yield Curve Rates, Constant Maturity Treasuries are not real securities, but are derived from the market yields of actual real treasury securities like 1 3 and 6 month bills, 2, 3, 5, 10 year and 30 year notes, and other off the run securities with maturities ranging from 7 to 20 years, and are reported by the Federal Reserve Board. While we mentioned that CMT Indexes are volatile, they are actually more stable than the CD Index, but less stable than the MTA or COFI indexes for comparison’s sake.

The most widely used CMT index is the 1-year CMT, which is used on ARM mortgages whose rates adjust annually once their initial fixed period ends. Other names for this index include the 1 Year T-Bill Index, the 1 Year Treasury Spot Index, and the 1 Year Treasury Security Index.

Other variants of the CMT index which are less popular but are still used in certain adjustable rate mortgages are the 3 Year CMT and the 5 Year CMT.

Due to its high degree of volatility, and its popularity as an ARM index, borrowers with CMT index adjustable rate mortgages may wish to explore their options to refinance due to current economic outlooks over the next 2 years, or risk significant payment shock when their ARM mortgage rates adjust at the end of the fixed period.