Why Constant Maturity Treasury (CMT) Rates Affect Mortgages

6 Min Read
Updated Dec. 18, 2023
Written By
Kevin Graham
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Mortgage rates are constantly impacted by movements in the bond market. However, some rates have a more direct impact than others. If you have an adjustable-rate mortgage (ARM), one index you should be very familiar with is the Constant Maturity Treasury (CMT). We’ll go over how CMT rates work before getting into how they impact your mortgage.

CMT Rates: Defined

The CMT rate is taken from the bid prices of various U.S. treasuries, which have varying lengths and time frames during which they pay out. From this, an average rate for a treasury security over a given period is derived. For example, in mortgages, one thing we consistently look at is the 1-year CMT rate.

The inputs for determining what the CMT rate is are the treasury prices paid by investors who buy and sell the securities. These securities are bought and sold typically through Treasury Direct, a U.S. government-backed marketplace. You can buy directly on the website. If you go to sell them, you assign the treasury obligations to a financial institution to sell the securities for you.


T-bills are the shortest-term treasury obligation you can buy. You buy them at a discount compared to the future value of the bill and it pays off in less than a year. The maturity date is measured in weeks. You can purchase them in increments of $100.

When the bond matures, you get its face value. You can also sell prior to maturity if you want to quickly cash in because you see the market moving against fixed securities that pay a given rate as compared to stocks that have a higher return possibility in exchange for greater risk.

You can think of T-bills being called that because they are due shortly. Although available in various increments, T-bills always pay off in a year or less.


T-notes represent the middle tier in terms of maturity dates. The notes pay off in one of several term lengths between 2 – 10 years. In fact, one of the biggest baseline indicators for 30-year fixed mortgage rates has traditionally been the 10-year U.S. Treasury note.

Notes work slightly differently than T-bills because you don’t have to wait for maturity for interest to be paid. You’re paid interest every 6 months until the note matures. As with notes, you can also sell prior to maturity, but there’s no guarantee you’ll make more or less money than if you decide to hold it for the life of the note.

You can think of T-notes as being the government’s version of a personal loan. That’s kind of how the term lengths are set up. The government is taking a loan from you and making a payment every 6 months.


T-bonds are like notes in that they pay interest every 6 months, but it’s over a much longer period of 20 or 30 years. A T-bond would pay the highest interest rate because it’s over the longest term, but you have to be willing to wait to see the full payoff. However, just like a T-note or T-bill, you could also choose to sell it before the loan matures.

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How Does The CMT Index Affect Mortgage Rates?

The CMT index itself is the average rate for the bid prices of a mix of treasuries on any given day. Think of the bids as what the market is willing to pay for a given bill, note or bond backed by the Treasury.

CMT rates most directly affect ARMs. But the CMT and treasuries in general are a trend line for overall mortgage rates. Rates tend to move in concert with treasuries at all times. The CMT will give you a good idea of where rates are headed if not the rates themselves.

Why Does The CMT Rate Affect ARMs, Specifically?

Along with the Secured Overnight Financing Rate (SOFR), lenders will often use the CMT rate as one of the indexes for adjustments on ARMs. Typically, these loans have a hybrid arrangement where rates are fixed for the first several years and adjust periodically after that.

The index level on any given day is added to a margin set by the lender. This is checked daily by lenders and rates are adjusted on a stipulated date in your contract. The payment schedule is then adjusted based on the new interest rate to pay off by the end of your term.

How Are CMT Rates Calculated?

CMT rates are based on the average of bid prices and the CMT itself is based on a yield curve. Because it’s based on a curve, it doesn’t necessarily match bid prices for any specific treasury term. The bid prices are mapped to fixed points that are matched up along the yield curve based on bid prices daily.

On the Treasury Department website, you can see daily movements in treasury rates for various maturities based on activity in the bond market.

The Relationship Between Maturity Points

Because it’s plotted along a curve, a CMT rate can be expressed for as many different maturities as there are types of treasury securities. Some of the most common rates looked at are the 1-year, 2-year and 10-year treasury rates.

For instance, the 1-year rate is tied into the adjustments on FHA and VA ARMs at some lenders. The 10-year treasury yield is usually considered a pretty good proxy for where 30-year fixed mortgage rates will be on any given day.

Investors also look at the 2-year position on the yield curve relative to where the 10-year rate is. When the yield is higher on a 10-year treasury security than a 2-year treasury, the economy is behaving normally. In general, you should get a higher interest rate for a longer-term investment.

However, occasionally the yield curve inverts and you get a higher interest rate by investing in a shorter-term security as opposed to a longer-term one. What’s happening here is that people are showing less confidence in the economy because bonds are viewed as safer.

They’ll try to lock as high an interest rate in the bond market as they can. But as people buy more long-term securities, the rates come down on these because the return doesn’t have to be as high to attract investors. Eventually, they buy enough of the securities at the longer end that the return becomes lower than what you can get at the shorter end of the market.

Although we’ve talked about the 2-year versus the 10-year treasury, the comparison between rates could be made at any two points along the curve.

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The Bottom Line: CMT Rates Are One Factor Impacting Mortgage Rates

The CMT rate is used by mortgage lenders to predict the market as well as set adjustments on certain ARM loans. Rather than being one rate, it’s actually tied to a series of yields based on different maturity dates for payoff. An individual CMT rate is set based on the average of the daily bids for treasury securities of a given length and then plotted along a yield curve.

In general, longer-term treasuries are going to yield higher rates of return than shorter-term securities, but the yield curve can occasionally invert, meaning shorter-term treasuries pay higher rates than long-term ones. This may be an indicator of recession based on flagging confidence in the economy.

Although the CMT is one indicator, the reality is much more complicated. There is also SOFR for other ARMs and the actual mortgage bonds themselves, which directly impact mortgage rates.

No one can predict the future, so if you’re ready to make a move and see a rate you like, you should go ahead and .


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