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MortgageWatch from MarketWatch101
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What is CMT - Treasury Yield Curve Rates
These rates are commonly referred to as "Constant Maturity Treasury" rates, or CMTs.
Why is this important?
Mortgage-backed security prices are highly correlated with the prices of U.S. Treasury bonds. This means the price of a mortgage-backed security backed by 30-year mortgages will move with the price of the U.S. Treasury five-year note or the U.S. Treasury 10-year bond based on a financial principal known as duration. (In practice, a 30-year mortgage's duration is closer to the five-year note, but the market tends to use the 10-year bond as a benchmark.) This also means that the interest rate on 30-year fixed-rate mortgages offered to consumers should move up or down with the yield of the U.S. Treasury 10-year bond.
More about CMT
Yields are interpolated by the Treasury from the daily yield curve. This curve, which relates the yield on a security to its time to maturity is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The yield values are read from the yield curve at fixed maturities, currently 1, 3 and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10 year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity.
Treasury Yield Curve Methodology The Treasury yield curve is estimated daily using a cubic spline model. Inputs to the model are primarily bid-side yields for on-the-run Treasury securities. See our Yield Curve Methodology page for details.
For more information regarding these statistics contact the Office of Debt Management by email at debt.management@do.treas.gov.
For other Public Debt information contact (202) 504-3350.
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