Small Target

Rates on the ten year US Treasury 10-year note fell back below 3% on weak economic news. Core CPI posted an annualized gain of 0.9%in June the smallest increase in forty years. Inflation expectations have dropped. The 10- year breakeven rate, the difference between a 10-year TIPS (inflation protected)Note and a 10-year note was 168 bps on Tuesday signaling that investors are betting on an annualized inflation rate of just 1.68% within a decade.

Five for Five

Treasury prices fell for 5 days in a row raising rates from last week’s low. Prices made a bit of a comeback today on the news that Moody’s downgraded Portugal’s debt two notches and on David Fisher of  Pimco’s comments about [the lack of] inflation. The spread between 10- year yields and TIPS yields, a proxy for fear of inflation, has fallen from nearly 2.5 in January to 1.86 today.

One Dip or Two?

Fear of the rare double dip recession led Treasury prices, which move inversely to yield, to their best half-year return since 1995.

More Lower

Treasury rates dipped further with the 10-year benchmark below 3%. It had briefly touched 4% in April. Pessimism about the pace of the recovery, about the European monetary issues about slowing growth in China led investors to take refuge in U.S. Treasury securities.

Down, Down, Down

As hopes for an economic snap-back faded, rates declined.

What's Up?

Rates, the stock market, the real economy, bank liquidity

Told Ya So

Last week we noted that Treasury rates would likely climb if the May jobs report out on Friday 4 May was strong and fall if it missed the consensus of 500,000. We were half right- Treasury rates climbed to a high of 3.42 in anticipation of a strong report. As we thought though, they crashed, along with equities, on a very disappointing jobs report last Friday.

Harris Newsletter

The credit market continues to improve in the Bay Area with spreads tightening.  Lenders are now competing for deals that have strong sponsorship, are well located, and have stable cash flow. We have also found that Lenders are willing to drop their DCR’s to as low as 1.15, and increase their loan to value to 75%.  They are also offering non-recourse debt. This trend is much better than what we saw in 2008 and 2009 when loan to values were 60% or less, and spreads were in excess of 400 to 500 basis points over the corresponding treasuries. While lenders have decreased spreads and have increased loan to values, they still require borrowers to have cash available from outside sources other than the subject property, and have experience owning or managing rental property. This has been a drastic change from three to four years ago. Those of us originating multifamily and commercial loans still must continually work hard explaining Lenders’ stringent requirements to our borrowers and the commercial real brokerage community. 

Bad News, Good News

Treasury yields bounced off their lows as the European debt crisis seemed to abate. However rates on the benchmark ten-year are nearly 3/4 point lower than they were two months ago.

Treasuries Soar, PIGS Crash

Treasury prices rose (and bond yields fell) to levels not seen since the financial crisis as a result of the European debt crisis. Fundamentals in the US continued to improve with durable goods orders up and new home sales up nearly 15%, smashing expectations.

6 Weeks, 60 Points

On April 5th the 10-year Treasury closed at a yield of 3.99%. Today it’s 3.39 yielding 60 points less. Bankers who were talking about raising their rates have cut them. Even as the U.S, economy strengthens with housing starts up and GM making money again, producer prices unexpectedly fell. The European debt crisis has fundamentally changed expectations about when the Fed will raise rates. Futures on the CME Group Inc. exchange show an almost 40 percent chance U.S. policy makers will raise the benchmark rate by at least a quarter-percentage point this year, down from a nearly 60 percent probability a month ago.

Downtown Development in San Francisco

Treasuries declined today as the stock market rose and fear and skepticism over the Greek bailout dissipated. However rates are at a level well below recent highs. Meanwhile the US economic recovery continues with monthly increases in employment, factory utilization, homes under contract etc.

Economy Improves and Rates Decline

As economic indicators improved on all fronts including housing sales, manufacturing usage, employment and service sector sales, the benchmark ten-year US treasury bond rate fell to 3.55 its lowest rate since 14 December 2009 and 42 bps off the recent high of 3.97 reached 6 April.

Rates Slip on Greece (Again)

The Benchmark ten-year Treasury rose the most this year as S&P downgraded Greek sovereign debt to junk status and forecast that investors in Greek bonds would recover no more than half of their principal. In a flight to safety, US treasury instruments rose sending rates lower.