Tuesday, January 6, 2015

RECI Reports Treasury Rates Drifting Downward


Jeanne Peck
Chicago, IL --- Chicago-based Real Estate Capital Institute (RECI) reports that as the middle of the decade starts,treasury rates are drifting downward, with the benchmark ten-year treasuries dropping nearly 20 basis points in December alone. 

In contrast to a year
ago, five year treasuries are slightly higher while ten-year notes dropped a
half of the percent lower. 

The tightening yield curve usually indicates an
economic slowdown, but such signs are hardly evident as the domestic economy
is healthier in the face of stagnating international markets.

Most economists are perplexed about rate movements, especially those
predicting predicted higher interest rates. As recently as a month ago,
numerous forecasts called for ten-year treasuries to increase to 2.5% or
more, while earlier in the year forecasts of 3% or more were common.

Certainly, 2015 will continue to be a challenging year for forecasting
interest rate movements, but nevertheless, nearly everyone agrees that rates
are near the bottom.  By all measures, now is one of the best times to take
advantage of capturing low interest rates, especially for longer-term debt.

Mortgage markets clearly reflect rate euphoria for borrowers as an almost
endless supply of funds flood commercial real estate markets. As expected, mortgage spreads over treasuries are under intense pressure to tighten.

Given the current oversupply of capital, spreads may drop below 100 basis
points for premium-quality, low leverage funding opportunities. For more "ordinary" deals, new spread ranges will likely be 25 to 75 basis points higher.  

On the other hand, lenders are trying to maintain "reasonable"
yields by instituting rate-floors for longer-term debt - typically 3.75% to
4%. And should treasuries remain low throughout the next few months and
assuming inflation fears subside, expect the removal of rate floors.

Jeanne Peck, director of the Real Estate Capital Institute's(r),, emphasizes that "2015 will be remembered as one of the best years for borrowers to take advantage of extremely low interest rates."

 Adding, "If a deal does not
pencil out at today's rates, then move on ..."


 For a complete copy of the company’s news release, please contact:

 Jeanne Peck,
Executive Director


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