Yesterday’s positive Institute for Supply Management’s (ISM) manufacturing report was significant, the index hit a 14-year high (61.3% vs. expectations of 57.9%). This comes on the heels of last week’s report that 2nd quarter GDP rose at a 4.2% rate, the best since 3rd quarter 2014. The data indicates that US Companies are expanding and are unfazed by trade dispute headlines.
Trade tensions have been a major factor in flight to purchases of Treasuries resulting in downward pressure on yields and keeping them below expectations for this level of economic expansion in the US. Another factor pointing to a run up in yields this fall will be: 1) on September 15, a special extension for pension funds to purchase Treasuries and deduct the contribution at last year’s lower rate expires. A major buyer may slow purchases and 2) with record supply spurring frequent and large auctions of debt and the Fed continuing to pare down its balance sheet of Treasuries, the yield curve may return to normal form with higher yields at the long end. The 10 year is sitting at 2.90%, watch for the next few key levels of 3.00% and then 3.15%. Will this week’s employment report (Friday) continue this narrative?
What does all this mean?
The 10-year treasury yield is likely to escalate in the coming months and there is still time to access cheap capital for ALL of your Real Estate financing needs. Give me a call today to discuss.
If you are interested in purchasing or refinancing Commercial Real Estate please contact me at firstname.lastname@example.org or (310) 993-9507.