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Volatility ripples through markets as Fed rate hike looms
Short-term borrowers are being hit hard by market volatility right now.
Commercial real estate investors looking for bridge debt will find that two to three-year debt is up a lot more than long-term yields, such as seven to Ten-year stabilized.
The Ten-year is still experiencing volatility, moving within a 10-point range in the last week.
Meanwhile, borrowers who usually look for longer term deals have asked Thirty Capital how they will be affected by Fed rate hikes which are on the horizon.
Thirty Capital anticipates that the rate increase set for March will be a half basis point, not a quarter.
Will the Ten-year continue to be range-bound?Going forward, the question is whether the Ten-year will be range-bound at around 1.75, or whether the yield curve will flatten.
Thirty Capital Analyst Bryan Kern says he believes the flattening is temporary, but that things will change once the Fed finishes tapering in March. That, along with a rate hike, will lead to a combination of inflation and growth. By the second quarter of the year, the Ten-year will start to move higher.
Exiting loans with longer maturityThirty Capital Analyst Jeff Lee gives a thorough analysis of what's happening on the CMBS side. And Thirty Capital CEO Rob Finlay points out that for borrowers looking for exit loans, it's probably time to look for exit loans with a bit longer maturity, because the long-term money is fairly cheap.
Jeff adds: "We had some deals that were closing that had a month or two left to maturity, but they needed to be opportunistic to close because it made sense just to not test the markets," he explains.
"On the other hand, on the CMBS and agency side, we were defeasing loans with 2028, 2029 maturities, and these things were just closed a couple of years ago. So we have a very wide range, but we're still averaging out to a 20-plus year average that we consume."
Policy-side 'frozen' right nowAnalyst Jason Kelley says not a lot is happening with government policy at the moment, with the focus fully on the markets and interest rates.
On the length of term of loans, Jason says: "We've been talking for six months about the pendulum of 'Do I do short-term debt or long-term debt?'.
"If the Fed does push up short-term rates in the next three or four meetings, then to me it's a hundred percent long-term. If the curve gets flat, it's the perfect time to put on long-term debt."
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By Thirty Capital LLCShort-term borrowers are being hit hard by market volatility right now.
Commercial real estate investors looking for bridge debt will find that two to three-year debt is up a lot more than long-term yields, such as seven to Ten-year stabilized.
The Ten-year is still experiencing volatility, moving within a 10-point range in the last week.
Meanwhile, borrowers who usually look for longer term deals have asked Thirty Capital how they will be affected by Fed rate hikes which are on the horizon.
Thirty Capital anticipates that the rate increase set for March will be a half basis point, not a quarter.
Will the Ten-year continue to be range-bound?Going forward, the question is whether the Ten-year will be range-bound at around 1.75, or whether the yield curve will flatten.
Thirty Capital Analyst Bryan Kern says he believes the flattening is temporary, but that things will change once the Fed finishes tapering in March. That, along with a rate hike, will lead to a combination of inflation and growth. By the second quarter of the year, the Ten-year will start to move higher.
Exiting loans with longer maturityThirty Capital Analyst Jeff Lee gives a thorough analysis of what's happening on the CMBS side. And Thirty Capital CEO Rob Finlay points out that for borrowers looking for exit loans, it's probably time to look for exit loans with a bit longer maturity, because the long-term money is fairly cheap.
Jeff adds: "We had some deals that were closing that had a month or two left to maturity, but they needed to be opportunistic to close because it made sense just to not test the markets," he explains.
"On the other hand, on the CMBS and agency side, we were defeasing loans with 2028, 2029 maturities, and these things were just closed a couple of years ago. So we have a very wide range, but we're still averaging out to a 20-plus year average that we consume."
Policy-side 'frozen' right nowAnalyst Jason Kelley says not a lot is happening with government policy at the moment, with the focus fully on the markets and interest rates.
On the length of term of loans, Jason says: "We've been talking for six months about the pendulum of 'Do I do short-term debt or long-term debt?'.
"If the Fed does push up short-term rates in the next three or four meetings, then to me it's a hundred percent long-term. If the curve gets flat, it's the perfect time to put on long-term debt."