What is the Treasury Index?
Anyone thinking of purchasing an adjustable rate mortgage (ARM) ought to be aware of the Treasury index. The fluctuation in the mortgage interest rate defined by this type of mortgage financing is determined primarily by this fiduciary index. The Treasury index is a fluctuating compilation of interest rates — commonly known as yield — resulting from the auction of Treasury bills (T-Bills) and Treasury securities. In addition, the index is based on the Treasury yield curve, also known as Constant Maturity Treasury (CMT) rates which formulate the various yields on securities to their time of maturity. The Treasury index is, by its very nature, subject to the vicissitudes of many national and international financial markets. Treasury securities essentially consist of: 1) T-Bills, which, as noted, are also a stand-alone integer of the Treasury index, 2) Treasury notes, 3) savings bonds and, 4) Treasury inflation protected securities (TIPS). The Treasury yield curve illustrates the average
