A Constant Maturity Treasury rate, usually shortened to CMT, is a theoretical yield that the U.S. Treasury calculates each business day by reading fixed maturity points off a curve built from the prices of actively traded Treasury securities. No actual bond pays a CMT rate. Instead, the Treasury interpolates what a security with exactly one year, five years, or ten years remaining would yield in today’s market, and the financial system uses those rates as standardized benchmarks for adjustable-rate mortgages, derivatives pricing, pension calculations, and discounted cash flow models.
How the Treasury Calculates CMT Rates
The Federal Reserve Bank of New York collects indicative closing bid prices on the most recently auctioned Treasury securities each business day at roughly 3:30 PM Eastern Time.1U.S. Department of the Treasury. Interest Rate Statistics Those prices are converted to yields and run through a mathematical model called the monotone convex method, which replaced the Treasury’s prior interpolation approach in December 2021.2U.S. Department of the Treasury. Yield Curve Methodology Change Information Sheet
The method works in two steps. First, it bootstraps forward rates at each input maturity so every observed security is priced without error. Second, it interpolates forward rates between those points to build a continuous curve the Treasury calls a “true par curve.”2U.S. Department of the Treasury. Yield Curve Methodology Change Information Sheet The CMT yields are read directly off that curve at fixed maturities. Because the curve is rebuilt daily, each rate reflects the market’s current pricing for that exact time horizon.
The nominal maturities the Treasury publishes are 1, 1.5, 2, 3, 4, and 6 months, plus 1, 2, 3, 5, 7, 10, 20, and 30 years.3U.S. Department of the Treasury. Daily Treasury Rates
Why a CMT Is Not a Treasury Security You Can Buy
A regular Treasury security is a tradable instrument with a fixed issue date and a fixed maturity date. Its remaining life shrinks every day: a 10-year note purchased today has nine years left in a year, eight years left in two. The yield it trades at reflects whatever time remains.
A CMT rate always represents the same horizon. The 10-year CMT is always exactly ten years, every day, because the Treasury recalculates it from the entire universe of outstanding debt. You cannot buy a CMT. As the Treasury’s own FAQ notes, CMT rates “may not match the exact yield on any one specific security” because they are read from constant maturity points on an interpolated curve.4U.S. Department of the Treasury. Interest Rates – Frequently Asked Questions
That constant duration is the whole point of the series. It lets contracts signed months or years apart reference the same standardized benchmark. When a loan agreement names “the 1-year CMT rate,” it means a theoretical security that always has exactly one year left, not whatever 1-year bill happens to be trading.
Nominal and Real CMT Rates
The Treasury publishes two separate sets of constant maturity rates. The nominal rates described above reflect yields without any inflation adjustment. Real CMT rates, sometimes called RCMT rates, are derived from Treasury Inflation-Protected Securities (TIPS) and represent yields after stripping out expected inflation.
Real rates use the same monotone convex interpolation method, but the real curve has fewer data points because the government issues TIPS less often than nominal securities.2U.S. Department of the Treasury. Yield Curve Methodology Change Information Sheet As a result, the Treasury publishes real CMT rates at only five maturities: 5, 7, 10, 20, and 30 years.3U.S. Department of the Treasury. Daily Treasury Rates
The gap between a nominal rate and the real rate at the same maturity is commonly called the breakeven inflation rate. If the 10-year nominal CMT is 4.3% and the 10-year real CMT is 2.0%, the market is pricing in roughly 2.3% average annual inflation over the next decade. Investors and policymakers watch these breakeven spreads as a real-time gauge of inflation expectations.
How CMT Rates Affect Adjustable-Rate Mortgages
The 1-year CMT is one of the primary indices lenders use to set interest rates on adjustable-rate mortgages (ARMs). For FHA-insured ARMs, the approved indices are the 1-year CMT and the Secured Overnight Financing Rate (SOFR). HUD formally replaced LIBOR with SOFR as an approved index in 2023 after LIBOR’s discontinuation.5Federal Register. Adjustable Rate Mortgages: Transitioning From LIBOR to Alternate Indices
The math is straightforward. Your lender sets a fixed margin at application, and that margin never changes after closing. At each adjustment, the lender adds that margin to the current index value. If the 1-year CMT is 4.25% and your margin is 2.75%, your fully indexed rate is 7.00%.6Consumer Financial Protection Bureau. For an Adjustable-Rate Mortgage (ARM), What Are the Index and Margin, and How Do They Work? Margins vary between lenders and are negotiable, so shopping on margin alone can meaningfully change what you pay over the life of the loan.
Rate caps limit how much your rate can move at any one adjustment and over the loan’s life. Most ARMs carry three:
- An initial adjustment cap limits the first rate change after the fixed-rate period ends, commonly two or five percentage points above or below the initial rate.
- A subsequent adjustment cap limits each later change, most commonly one or two percentage points from the previous rate.
- A lifetime cap limits total movement over the entire loan, most commonly five percentage points in either direction from the initial rate.7Consumer Financial Protection Bureau. What Are Rate Caps with an Adjustable-Rate Mortgage (ARM), and How Do They Work?
When the CMT index spikes, these caps keep your payment from jumping the full amount at once. The uncapped portion can carry forward, though, so a sharp move may produce several consecutive rate hikes until the fully indexed rate is reached or the lifetime cap stops the climb.
Other Places CMT Rates Show Up
Beyond mortgages, CMT rates appear wherever the financial system needs a standardized, government-backed reference rate. Commercial loans and home equity lines of credit often tie their floating rates to a specific CMT maturity. Interest rate derivatives, including swaps, caps, and floors, use CMT rates as one proxy for the risk-free rate when pricing contracts and managing counterparty exposure.
The IRS still references the 30-year Treasury constant maturity rate in its weighted average interest rate tables used for certain pension funding calculations.8Internal Revenue Service. Weighted Average Interest Rate Table Portfolio managers and corporate finance analysts use CMT rates as building blocks in discounted cash flow models. The 10-year CMT commonly serves as the risk-free rate input when calculating net present value or estimating a company’s cost of capital, and because the Treasury publishes rates from one month to thirty years, analysts can match the discount rate to whatever horizon they are valuing.
What the CMT Yield Curve Shape Tells You
Plotting all the CMT rates from shortest to longest maturity produces the Treasury yield curve, one of the most watched indicators in economics. The curve’s shape reflects how the market views the tradeoff between lending for a short period and a long one.
- A normal, upward-sloping curve means longer-term CMT rates are higher than shorter-term rates. This is the most common shape and reflects expectations for steady growth and moderate inflation; investors demand higher yields for tying up money longer.
- A flat curve means short-term and long-term rates sit close together, often signaling uncertainty or a transition between economic phases.
- An inverted curve means short-term CMT rates exceed long-term rates, a shape that draws attention for its track record as a recession warning.
The spread between the 2-year and 10-year CMT rates is the most commonly tracked measure of curve shape. The Federal Reserve Bank of St. Louis publishes this spread as a standalone series (T10Y2Y) going back to 1976.9Federal Reserve Bank of St. Louis. 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity (T10Y2Y) Research from the Federal Reserve Bank of Chicago found that the slope has turned negative before each recession since the 1970s, with one false positive in the mid-1960s when an inversion was not followed by a recession.10Federal Reserve Bank of Chicago. Why Does the Yield-Curve Slope Predict Recessions? The lag between inversion and recession has ranged from a few months to over a year.
Where to Find Current and Historical CMT Rates
The Treasury publishes current and historical CMT rates on its Daily Treasury Rates page, updated each business day.3U.S. Department of the Treasury. Daily Treasury Rates The Federal Reserve Board publishes the same data through its H.15 Selected Interest Rates release, posted daily at 4:15 PM Eastern on days the Board is open.11Board of Governors of the Federal Reserve System. Selected Interest Rates (Daily) – H.15 For interactive charts, bulk downloads, or API access, the Federal Reserve Bank of St. Louis’s FRED platform carries the series through the Board’s Data Download Program. Whichever source you use, the underlying rates originate from the same Treasury interpolation process, so the numbers are identical.