The US Treasury

The US Treasury markets appear to be stabilizing after a volatile period which saw the 10-year treasury yield increase 1.63% on 10/3/16 to 2.39% on 12/6/16 (a 76 basis point increase). Many have pointed to the outcome of the presidential election and the pro-growth policies of president elect Trump as the catalyst for this rate movement. The historical interest rate charts tell a different story.

The 10-year treasury rate was in a similar place at this time last year (December). The charts show that rates dropped substantially as a result of BREXIT (the United Kingdom vote to leave the EU). They have since stabilized over a period of the past 4-6 months. The rise in yields has probably been exacerbated by the election, but by no means has that been the only cause of the increased yields.

What does this mean for most borrowers? The increase in the 10-year treasury means higher coupon rates for most borrowers. However, most lenders have not increased the rates that they are offering borrows in lock step with the rise in the 10-year treasury. Most lenders have increased coupon rates offered to borrowers by 25-35 basis points on average. This still leaves interest rates at historic lows. Most 10-year fixed rate loans are still being placed in the 3.75-4.75% range.

David Bruni
Commercial Mortgage Banker
dbruni@slatt.com