Understanding the Monthly Treasury Average (MTA) Index: A Key Adjustable-Rate Mortgage Indicator

Julia Kagan is a financial and consumer journalist, formerly a senior editor for personal finance at Investopedia.

What Is the Monthly Treasury Average (MTA) Index?

The Monthly Treasury Average (MTA) is an interest rate benchmark calculated as the 12-month moving average of one-year constant maturity Treasury bonds (one-year CMT). This index serves as a foundational rate for setting interest on certain adjustable-rate mortgages (ARMs).

Known also as the 12-MAT, the MTA is a lagging economic indicator, meaning it reflects trends after they have begun to develop, providing a smoother and less volatile interest rate compared to other indexes.

Key Points to Remember

• The MTA is derived from the 12-month moving average of one-year constant maturity Treasury yields.
• It is commonly used to determine interest rates on some adjustable-rate loans, including ARMs.
• Due to its nature as a lagging average, the MTA often differs from current one-year CMT or one-year LIBOR rates.

How the Monthly Treasury Average Index Works

The MTA index is computed by summing the last twelve monthly one-year CMT interest or yield values and dividing by twelve. The one-year CMT represents the estimated yield of recently auctioned U.S. Treasury bills, notes, and bonds with a one-year maturity.

When monthly CMT values rise consecutively, the MTA typically remains lower than the current CMT. Conversely, if CMT values decline month-over-month, the MTA tends to be higher than the current CMT. This inverse relationship results in a more stable and less fluctuating index than others like the one-month LIBOR or the CMT itself.

During periods of significant interest rate volatility, such as the late 1970s and early 1980s, the MTA could diverge from the CMT by several percentage points. For instance, in December 2024, the MTA was 4.68%, while the CMT stood at 4.17%.

Selecting an Index for Your Mortgage

Some adjustable-rate mortgages give borrowers the option to choose from different indexes. Selecting the right index requires careful evaluation. Although the MTA usually offers a rate slightly lower than the one-month LIBOR by 0.1% to 0.5%, this can lead to negative amortization if combined with payment caps. Negative amortization occurs when monthly payments don't cover the interest due, causing unpaid interest to be added to the loan principal and increasing future interest costs.

Additionally, due to its lagging nature, the MTA might result in higher payments during periods when interest rates are falling.

Important Update on LIBOR

LIBOR is being phased out due to reliability concerns and regulatory changes. The Federal Reserve and UK regulators have announced that LIBOR will be discontinued by June 30, 2023, replaced by the Secured Overnight Financing Rate (SOFR). As part of this transition, certain USD LIBOR rates ceased publication after December 31, 2021.

The fully indexed interest rate on an ARM equals the sum of the chosen index value plus a fixed margin. While the index fluctuates, the margin remains constant throughout the mortgage term. Mortgages tied to the MTA typically include a margin of around 2.5%.

When comparing indexes, consider both the index rate and margin, as a lower index may come with a higher margin, affecting overall costs.

Is CMT the Same as Treasury Rate?

No. The constant maturity Treasury rate (CMT) is an estimated yield derived from Treasury securities, whereas the Treasury rate refers to actual yields from Treasury auctions.

How Is the Monthly Treasury Average Calculated?

The MTA is calculated by adding the twelve most recent monthly one-year constant maturity Treasury yield values and dividing the total by twelve.

What Is the Current MTA?

As of February 2025, the U.S. Treasury reports the MTA at 4.37%.

Final Thoughts

If you’re considering an adjustable-rate mortgage, understanding the Monthly Treasury Average index is crucial. It serves as a key benchmark in determining your mortgage interest rate, reflecting an average of the past year’s Treasury yields. Its lagging nature makes it less volatile, but it may also cause your mortgage rate to respond more slowly to changes in the economy.

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