Treasury Bill

Treasury Bill (T-bill) indexes are based on the results of auctions the U.S. Treasury holds for its Treasury bills, bonds, and notes. The U.S. Government issues treasury bills to pay for the national debt and other expenses. T-bills are issued with maturities of 3 months, 6 months, and 1 year. Adjustable rate mortgage (ARM) products are tied to these types of treasury bills, and adjust once every 6 months, once per year, or once every 3 years accordingly. The index commonly referred to as the “1 Year T-Bill” is actually the 1Year CMT index, which is tied to most 1 Year ARM’s. The 6 month Treasury Bill index is most commonly used with adjustable rate mortgages (ARMs).

The Treasury Bill indexes are reported by the Federal Reserve Board. The T-Bill indexes move with the market and respond quickly to economic changes (as do CMT indexes), which make them a more volatile index than the slower moving COFI or MTA. In general, the 3 month T-bill tends to have the lowest index value due to the least amount of risk to the bank.