From Policy to Property - 2nd Edition: Understanding Fed Policy, Treasury Markets, and Their Effects on Commercial Real Estate

Where Are We Now?

At the time of publishing this article, the 10-year Treasury yield has begun to decline significantly, falling from its previous highs. Just months ago, commercial property loan interest rates were increasing despite the Fed reducing the effective rate by 50 basis points from 5.33% to 4.83%. Now, however, we're seeing interest rates start to stabilize as the 10-Year Treasury yield retreats to under 4.30% down from the high of ~4.80% in January (2025). Why is that?

Factors Influencing Treasury Markets | DOGE

Treasury yields have recently started to decline due to several key factors. Concerns over economic slowdown, improving inflation metrics, and growing investor sentiment that the Fed may ease monetary policy in the coming months have led to a shift in the bond market. Additionally, demand for Treasuries has increased as investors anticipate a softer rate environment, contributing to lower yields. Furthermore, DOGE (Deficit-Oriented Government Efficiency) policies have positively influenced the market by reducing government spending, which in turn has strengthened the Treasury market and can also help reduce inflation.

The Lag Period | 3 Months In

Three months have elapsed since my original article from November 2024, (Original Article), which highlighted that typically, we see a lag period of about six months between Fed rate cuts and their impact on Treasury yields and commercial interest rates. It appears we are exactly halfway through this lag. While there are signs of relief, we are not out of the woods yet.

To Be Determined | Tariffs

The market is still evaluating the effects of this presidential administration's policies, particularly the impact of tariffs on global trade and domestic economic stability. A potential tariff war could have significant repercussions on fiscal policy, influencing inflation, consumer spending, and overall economic growth. As these policies unfold, they may alter the trajectory of interest rates and commercial lending conditions.

In the Meantime...

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