Just when it seemed the monthly Treasury average couldn’t go any lower — it tumbled and will likely fall further.
The MTA was 0.75750% in August, based on data reported by the Federal Reserve. The index was 0.90083% the prior month and 2.66417% the prior year.
The first step in calculating the MTA is determining the daily average of the one-month Treasury bill yield for each of the last 12 months. The daily average was 0.46% in August.
Then, an average is computed for the 12 months.
While the MTA already sits at its lowest level on record, an analysis of the last nine months indicates the index will likely fall below 0.60% and could crack 0.50% within the next three months.
The MTA is used as an index for adjustable-rate mortgages. Another ARM index, the yield on the one-year Treasury bill, ended August at 0.43%, lower than 0.48% at the end of July, data from the U.S. Department of the Treasury indicated. Yesterday, the one-year yield closed at 0.41%.
The six-month London Interbank Offered Rate — the underlying index for many subprime ARMs — was 0.76% at the end of last month, Bankrate.com reported. LIBOR sat at 0.94% at the end of July.
The ARM share was 5.6% in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended Aug. 28.