HOW DOES THE TREASURY INDEX WORK?
A. These indexes are based on the results of auctions that the U.S. Treasury holds for its Treasury bills, notes and bonds. Treasury bills are issued by the U.S. government with maturities of 3, 6 months, and 1 year in order to pay for the national debt and other expenses. ARMs tied to the 3-, 6-Mo, and 1Yr T-Bills usually adjust once every six months, once each year, or once every three years accordingly. The 1-year Treasury Bill index (1-year T-Bill) is the most commonly used index for traditional ARM products that amortize. It is also become widely used with longer term “Interest Only” ARM products like the 3,5,7 & 10/1 ARMs.
