Rates set to get ‘ugly’ as supply chain issues push inflation higher

<p>Next year is set to be “ugly” when it comes to rates, predicts Thirty Capital Senior Analyst Bryan Kern.</p> <p>Supply chain issues are pushing inflation higher, and rates will increase significantly by February, says Bryan.</p> <p>The markets are set for a very rough ride, as experts wonder if the new Omicron variant will lead to yet another shut-down.</p> <p>This week’s employment numbers and the next round of inflation numbers are guaranteed to rattle the markets before Christmas.</p> <h1>Treasury’s “crazy” moments</h1> <p>Thirty Capital CEO Rob Finlay describes the Treasury’s “crazy moment” right before Thanksgiving. Earlier, President Joe Biden re-appointed Jerome Powell as Fed Chair, and the economy posted relatively strong data.</p> <p>However, all this was wiped out with bad news that Omicron is classed as a COVID variant of concern - and is spreading. The Treasury reacted with a drop of 16 bps, and the week finished at about 1.48.</p> <p>By Monday morning things were starting to normalize, with a return to around 1.56.</p> <h1>Now could be an expensive time to be underwriting deals!</h1> <p>The Thirty Capital team still predicts a 20-point range for the Treasury, between 1.50 and 1.70 up until the end of 2021.</p> <p>Some market analysts even predict a low of 1.30. Regardless, Rob points out that commercial real estate professionals have about a 20 basis point swing either way - making it an expensive time to be underwriting deals.</p> <h1>Confusion and questions as LIBOR nears end</h1> <p>Senior Analyst Jay Saunders notes a slight increase in short-term rates as LIBOR nears its end. One-month LIBOR hit 10 basis points. BSBY is up a touch at 6.5. One-month term SOFR is at about 5.2.</p> <p>The caps market is volatile, notes Jay, who gives a full review of all short-term rates in the episode.</p> <p>The end of LIBOR - set for Dec. 31 - is bringing up a lot of questions from Thirty Capital clients, with commercial real estate investors wondering what their index will be a year from now. If you have ques