The 10-year Treasury yield dropped to a record low on Tuesday as the historic decline in U.S. rates continued amid the coronavirus outbreak and the Federal Reserve’s 50-basis-point (bp) emergency interest rate cut two weeks before its March meeting. The 10-year Treasury yield fell to an intraday record low of 0.914% before closing at 1.02%.
The Federal Reserve lowered its benchmark interest rate by half a percentage point to a range between 1.00% and 1.25%, citing economic risks posed by the coronavirus outbreak. This was the first cut between scheduled policy meetings since October 2008, and the cut surprised investors who were waiting for action at the March meeting in two weeks.
The 10-year swap rate, the benchmark for setting CMBS conduit loan interest rates, has fallen to a record low of 0.97% in response to the outbreak. Meanwhile, CMBS securities pricing has widened, but not nearly as much as swaps have fallen. AAA-rated CMBS spreads have risen from Swaps plus 80-90 bp to Swaps plus 90-110 bp.
As a result, loan spreads in Term Sheets have increased 25 bp to 250-275, but with Swaps at essentially 1.0%, CMBS conduit loan rates are in the 3.5-3.75% range for full-leverage loans, the lowest in the history of CMBS lending.
For a free, no-obligation loan quote at these historically low rates, contact a member of the ValueXpress team: Mike Sneden (email@example.com), Dennis Suh (firstname.lastname@example.org) or Gary Unkel (email@example.com).