The markets are seeing an incredible flattening of the yield curve right now - reflecting uncertainty beyond the upcoming Fed rate increases.

Thirty Capital Analyst Bryan Kern explains that the long end of the curve is very different from the short end, as expectations around Fed rate increases in the next two years come into play.

"Beyond rate increases there is uncertainty, so the Ten-year just sort of whipsaws based on some of the economic data we are seeing," explains Bryan.

Will there be an inverted yield curve this year?

Bryan doubts there'll be a completely flat yield curve in two years or so, but Thirty Capital Analyst Jay Saunders disagrees, saying he believes the yield curve will become very flat and perhaps even inverted.

"Clearly the market hasn't bought into the argument that inflation is here to stay or you wouldn't be under a two-percent on the Treasury," Jay explains.

"I think The Fed will push short-term rates up, the curve will continue to flatten, and at some point will become very flat to inverted. That will be the signal for the Fed that they've pushed rates up as far as they can."

Thirty Capital CEO Rob Finlay points out that there's nothing better for people who are looking to refinance long-term debt than to have an inverted yield curve.

Long-term or short-term loans for CRE investors?

Bryan recommends longer term loans. "If we look at the absolute level of rates, they are still ridiculously low, historically speaking.

"Right now, if someone can lock in five-year debt versus ten-year debt, the difference is only 15 basis points. Why not?" asks Bryan.

Rob notes that prepayment penalties will be less, and as the curve flattens the financial impact might not be as bad if investors run the analysis. Of course, this all depends on how much and how fast the curve flattens.

Keeping an eye on SOFR and LIBOR

The upcoming week will be interesting - it'll be the first time the market has seen term SOFR rates that are going to be resetting over a Fed meeting where there's an anticipated rate hike.

Jay says LIBOR will start to tick up ahead of anticipated Fed tightening.

The week ahead will see inflation numbers released, which were being impacted by ongoing supply chain disruptions.

A sea change in the market

Analyst Jason Kelley foresees a sea change in the market, with inflation impacting the world, not just North America. Jason anticipates that interest rates are set to increase and stay high for some time to come.

Listen to the full episode for all the analysis, news, and views!