Glossary

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Treasury Index
The Treasury index is a metric most often used to determine the rate on an adjustable-rate mortgage. Because adjustable-rate mortgages fluctuate from year to year, they are usually indexed to some outside indicator. If the Treasury index is the indicator, the mortgage rate would fluctuate depending upon what the federal government pays its investors for Treasury bills. This is probably the most common index that mortgage lenders use when they hand out an adjustable-rate mortgage. The Treasury index can react to a number of factors; however, it tends to reflect the availability of other safe investment vehicles. When people are able to invest in things like certificates of deposit at decently high rates, the Treasury will have to pay slightly more in order to encourage people to buy Treasury bills. This, in turn, will raise the rate that a borrower pays on his or her adjustable-rate mortgage.