Hello,I'm having some trouble understanding what is CMT and exactly how it is obtained. Almost every page that I got from Google says"Constant Maturity Treasury (CMT) indexes These indexes are the weekly or monthly average yields on U.S. Treasury securities adjusted to constant maturities. Yields on Treasury securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. "but how is the "adjustment to constant maturities" done? and to which set of U.S. Treasury securities? etc.This is probably a very elementary question but hopefully someone could explain. Thanks!

pls correct me if i'm wrong, so to get the 1-Year CMT rate, we would1) Take all the actively traded treasury securities in the past week that have a maturity of 1-Year2) Calculate their yields from their prices3) Do a simple average of the yields to get the 1-year CMTthere is probably something wrong with that process since I don't see how does the "interpolated ... from the daily yield curve" in the explanation below come into the picture..

I remember doing some research on this a while back. CMT rates are derived by cubic spline interpolation of the par yields of actively traded Treasuries.

does that mean that if there are two actively traded treasuries with time to maturity 6yr 4 mths and 4 yr respectively, then the 5 yr CMT rate calculation would include an estimate of the yield from cubic spline with those points (and possibly others), as well as all actively traded treasuries with exactly 5 years to maturity?

In theory yes, in practice, no.The primary inputs to the CMT model are the average closing bid (that is, averaged from different dealers, but never averaging bids on different bonds) yields of the active on-the-run securities. Your 76 and 48 month securities are not likely to be included because there will be more recently-issued Notes that had the same original maturity.It seems strange that the Treasury prefers to interpolate a 60 month yield from the yield on a five-year Note issued two months ago (current time to maturity, 58 months) than avoid interpolation by using, say, a seven-year Note issued two years ago (current time to maturity, 60 months). But even when there is liquidity in the seven-year Note, and even when its coupon is close enough to the current interest rates not to distort things, it still trades at a significantly higher yields than a newly-issued five-year, current coupon Note would.The CMT is a pretty good estimate of the yield at which a newly-issued treasury of the given maturity would sell for par.

thanks everyone, that was very helpful