Basic money market/fixed income question: What is a “constant maturity U.S. treasury”? Is this an actual traded instrument that is “investable”? Can an entity purchase CMTs?
anyone?
I did Google it, smart guy. Saw a couple of theoretical discussions of CMTs as being an “index” and theortical treasury yield. Nothing that answered my direct query of whether they are investable securities (vs. a theoretical index/yield that is not traded)
Well if you had, you’d have read investopedia: “What Does One-Year Constant Maturity Treasury - 1-Year CMT Mean? The interpolated one-year yield of the most recently auctioned four-, 13- and 26-week U.S. Treasury bills, plus the most recently auctioned 2-, 3-, 5- and 10-year U.S. Treasury notes as well as the most recently auctioned U.S. Treasury 30-year bond, plus the off-the-runs in the 20-year maturity range.” So it’s an interpolated yield calculated from reference securities - ie an index. You could track it, but you’d have to rebalance each day. Or you could do a swap and let someone else do it for you.
I’ve dealt with CMTs before; it’s a preferred benchmark used for some stable value products and we just recently recommended this to a committee to move its benchmark from ryan labs GIC 3 yr index (and a secondary citigroup 3mo t-bill index) to the CMT. I forgot the motivation behind this – it was probably something to do with aligning the duration of the product to the benchmark. i can look further into my emails if you want a more detailed response.