U.S. Treasury Yield Curve Nominal and Real Q4 2017 vs. Q3 2017
At the end of the 4th quarter of 2017, U.S. Treasury yields, on a nominal basis, were up around 30 basis points in all but the longest maturities, which were down slightly, versus the end of the prior quarter. On a real basis, the story was similar, with longer term real rates up with the shorter end declining.
The interest rate environment has the ability to affect commercial property economics in a number of different ways (see this, this, and this). Borrowing costs are, of course, affected directly, as higher interest rates increase the cost of borrowing and thus negatively affecting demand. Cap rates tend move over time with interest rates, but not in lockstep, with considered analyses generally concluding that capitalization rates on average move in the same direction as 10-year rates, but only about a third as much, and again not in lockstep. Interest rates also affect the economy, which in turn affects vacancy and rental rates. In summary, the interest rate environment is very important to commercial property investment.
View more yield curve quarterly snapshots.