Real estate investors generally don’t care about short-term interest rates. The short term rates affect the cost of capital for bridge financing where those loans are indexed to the secure overnight funds rate. Short term debt can be replaced with permanent financing. I really painful increase in borrowing costs is tied to long-term interest rates.

We have experienced an inverted yield curve for much of the past two years.

This past week, yields on the 10 year Treasury hit 4.5%, a 16 year high. When you read the mainstream media, it’s as if the pricing for the 10 year Treasury is linked to inflation expectations and to some forecast of the Fed’s higher for longer narrative. 

The question is why have the yields on US government debt increased in particular over the last 60 days? The United States has issued $1 trillion of new debt over the last three months. They have literally flooded the market. When you flood the market with any commodity, prices will fall which means yields will rise.


Host: Victor Menasce