Weekly Market Insight • 10-year Treasury Yield, 2011 • 9/12/11

Having trouble viewing this email? View it as a web page.

10-year Treasury Yield, 2011 September 12, 2011

Source: Federal Reserve, Grubb & Ellis

The yield on the 10-year Treasury note ended Friday at 1.93 percent, the lowest level since at least 1962 when the Treasury Department began publishing daily rates. The decline of approximately 150 basis points so far this year has been driven by fear that policymakers in Europe and the U.S. are unable to manage the overhang of sovereign debt, which threatens to destabilize the global banking system and tip the European and U.S. economies into recession. The bond market also is reacting to “Operation Twist,” the potential for the Federal Reserve to drive long-term rates even lower by selling shorter-term debt and using the proceeds to buy longer-term debt. Lower rates would encourage businesses to borrow and take on more risk, although the results are likely to be modest as long as business and consumer confidence remains depressed. The Fed’s strategies to ease monetary policy have been likened to pushing on a string. Businesses are concerned about final demand and the opaque regulatory climate, and lower rates may not be enough to get them back in the game. In normal times, low Treasury rates are good for commercial real estate, encouraging lenders to ease terms and making property cash flows and REIT dividends look more compelling for investors. But this is the “new normal,” a period when ultra-low interest rates are a sign of fear as investors pile into low-risk Treasury debt, pushing yields to record lows. This heightened aversion to risk makes safer commercial real estate assets look appealing, especially apartments and higher-quality properties secured by long-term leases with no near-term rollover risk. But the uncertainty is not good for the overall commercial real estate market, which needs business confidence to generate leasing activity and fill vacant space.
Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

Need more information? Contact:

Robert Bach
Senior Vice President, Chief Economist
312.698.6754

To unsubscribe from this email select "Reply" and type "Unsubscribe me" in the subject field.
© 2011 Grubb & Ellis, all rights reserved.
Advertisements

About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s