Should commercial real estate investors be concerned bout the inverted yield curve?

Part of the yield curve has inverted, and this has been all over the financial markets headlines in the last few days. <p>In this week’s Capital Markets Report podcast, The Thirty Capital team takes a look at this and what it means for commercial real estate borrowers.</p> <p>Explains Analyst Jason Kelley, the curve is “Continuing to get more and more flat. There's really no difference between a Five-year and a Ten-year treasury . . . about one basis point (bps) difference.” </p> <p>Meanwhile, the Two-year continues to creep up. In the last year, it has moved up more than 186 bps, compared to the Ten-year’s increase of 52 in the same time period.</p> <h1>What do commercial real estate borrowers need to know?</h1> <p>Thirty Capital CEO Rob Finlay says commercial real estate borrowers need to remain aware that rates have winded out and spreads have winded out as the capital markets are repricing loans and other products in the space.</p> <p>“From an underwriting perspective, make sure you widen out a little bit and be a little bit more conservative with your pricing assumptions,” Rob cautions.</p> <h1>Market thinks the Fed’s getting it wrong</h1> <p>There were a few days last week where the curve went inverted for intraday trading, with shorter yields passing the long-term yields.</p> <p>What’s happening now is a continuation of the same story we’ve had for a while. Jason explains that “The market's thinking the Fed's going to get it wrong; that the Feds will force rates up, force a bit of a recession, and then they're going to have to backtrack.”</p> <h1>Inflation is real, not transitory</h1> <p>Rob agrees with Jason, saying: “There's no way to do a soft landing here. I think it's a fantasy world to think that this inflation is just transitory and not real.”</p> <p>Thirty Capital Analyst Jeff Lee cautions that the inflation numbers from last week don’t account for the Ukraine situation, so consumers can expect eight points or more in the next inflation numbers.</p> <h1>What’s a commercial real estate borrower to d