U.S. Treasury Yield Curve Nominal and Real Q2 2015 vs. Q1 2015
At the end of the 2nd quarter of 2015, U.S. Treasury yields, on a nominal basis, were largely unchanged in the shortest maturities versus the quarter prior, but higher as maturities lengthened, about 50 basis points higher on 30-year maturities, but only about 30 basis points higher on the more relevant (to commercial real estate) 10-year maturities. On a real basis, these yields closed somewhat higher across all maturities reflecting a lower inflationary environment.
Interest rates affect commercial real estate in numerous ways (see this, this, and this). Borrowing costs are affected directly, with higher rates increasing borrowing costs and thus negatively affecting demand. Cap rates typically move with interest rates, albeit not in lockstep, with considered analyses generally seeming to conclude that cap rates on average move in the direction of 10-year rates, but only about a third as much. Interest rates affect the economy, which in turn affects vacancy and rents. In short, the interest rate environment is highly important to commercial real estate investment.
View more yield curve quarterly snapshots.