Intense volatility in the Treasuries is the key factor dominating the markets this week. And it's set to continue.

The erratic performance of the past few weeks has seen a low of 1.30 to a high of 1.90; it was sitting at 1.72 at the time of recording this episode.

"There are so many questions around what the Fed is going to do, that's affecting the short-term to two- to five-year sector," explains Thirty Capital Analyst Bryan Kern.

"That's obviously going to translate into some volatility in the Ten-year sector," he continues. "We may retest the 1.61 to 1.65 levels. But, generally speaking, I think we'll see that trend continue on up towards our 2% target here in the first quarter."

In the coming week rates will be impacted by fourth-quarter GDP, along with inflation numbers and consumer confidence stats.

Long-term rates going up, short-term rates even higher

Bryan says the market's question has changed from "Will the Fed hike in March?" to "Will the Fed hike 50 bps in March?".

He doesn't think the hike will be that high, explaining: "There are some people who expect five total hikes of 125 basis points. I don't think we'll see that. I think the median is 100 bps. But having said that, I think that's going to create some volatility.

"We will see a lot of volatility in that intermediate term three to five-year sector."

For commercial real estate investors, this means that long-term rates are going up, and short-term rates will be even higher.

Ukraine, COVID, Fed tightening all impacting markets

Analyst Jay Saunders points out that global events are heavily impacting the markets right now.

"You've got the Fed pivoting from easy money to tightening. You've got Ukraine and you've got COVID. There are so many things right now pulling the market in different directions.

"It's really hard to know where it's going to go, but I think you will see a lot of volatility."

Term SOFR now adopted in real estate transactions

Thirty Capital is seeing pretty wide adoption of term SOFR. Notes Jay: "In fact, I'd say in the last three weeks, now we're into three weeks of no more LIBOR, on the real estate side, I think exclusively we've seen one-month term SOFR on all the hedging products that we've executed."

Fanny and Freddy use the 30-day in advance, and it's compound average in advance. With private lenders, it's almost all term SOFR. The only place Jay is seeing a simple average SOFR is in the direct bank lending markets. We're seeing some of that.

Jay also discusses the differential between term SOFR and 30-day forward looking.

Confusion in the market around term SOFR

Thirty Capital CEO Rob Finaly points out that there is confusion in the market around term SOFR, not to mention that the conversion of LIBOR-based loans from borrowers has yet to happen.

Rob notes that issuers on the CMBS side and the CLS side have been having trouble trying to get people to adopt to term SOFR, because there is some arbitrage between interrelated Treasuries, term SOFR, and the 30-day compounded SOFR.

This week's tip: Pay attention to the crypto market and the theoretical wealth some people have in crypto. It's definitely set to be more influential in the coming months.

Be sure to follow Rob on Twitter and LinkedIn!