COFI

The 12-Month Treasury Average, or MTA index, is a relatively new ARM (adjustable rate mortgage) index. (The MTA index is also referred to as the MAT, or 12-Month Moving Average Treasury.) The MTA index is based on the average of the previous 12 months’ monthly yields of U.S. Treasury securities adjusted to a constant maturity of one year. The MTA can be calculated by adding the monthly yields and dividing by 12. Because it is based on an average, higher yields in certain months are offset by lower yields in other months. This has resulted in an MTA average below 5% over the past 14 years.

As mentioned, the MTA is based on an annual average, and thus is more steady than the 1 year CMT index. The MTA has historically been slightly more volatile than the 11th District COFI, however past movements with the indexes track each other very closely. ARM products tied to the MTA and the COFI index are very similar in that they both have potential for negative amortization, or deferred interest. A positive characteristic of the MTA index is over the past 14 years it has averaged below 5%, making it one of the most popular for adjustable rate loan products. Another indication of MTA index movement is to watch fixed rate mortgage rates: as fixed rates increase, the MTA index also moves slightly higher but at a slower pace.