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| Weekly Interest Rate Tracking |
| December 10, 2008 |
Good Afternoon,
Attached is a PDF copy of Colliers Meredith & Grew's interest rate sheet that includes current and historical Treasury, LIBOR and Prime interest rates, which are updated daily with real time data from Strategic Alliance Mortgage.
We provide these updates on a weekly basis to keep our clients and colleagues aware of rate movements. We hope you find this information helpful.
DOWNLOAD INTEREST RATE SHEET (149KB)
The following Market Perspective provides insights and commentary on breaking news and emerging trends in commercial real estate finance.
CMG Market Perspective.
Dennis Weaver, an American television actor, once said of risk taking, "to get what you want, stop doing what isn't working."
What do investors want? Right now, indicators suggest protection of capital over return on capital. What isn't working? The Global equity and secondary mortgage-backed securities markets are in a state of paralysis by analysis; focus too long on any one strategy and you'll end up finding a reason to retreat.
The herd mentality for protection of capital was on full display this morning. The Big Three automakers have long used zero percent purchase financing to move product at year's-end and during down market cycles. How ironic then, that as lawmakers finalized a $14 billion bailout of the U.S. auto makers, "investors gave the U.S. government 0% financing while the yield on other Treasury bills fell below 0%" according to WSJ.com.
The U.S. Treasury auctioned $32bn of four-week T-bills today at zero percent, the lowest offered yield since the bill's introduction in 2001, "with investors in effect giving their cash to the government for safe-keeping until 2009," according to WSJ.com. Reports put the demand to supply ratio at four-times the offering amount, suggesting a global year-end flight to quality has begun. Risk-averse investors have poured capital into Treasuries and cash equivalents recently, pushing yields across the board to historic lows.
For investors trying to navigate the capital markets amidst news of declining fundamentals and leading benchmark indicators suggesting a deepening global recession, the protection of capital has surpassed the need for return on capital. This market-wide flight to safety has been a boon for U.S. Treasuries, which are perceived as the safest of safe haven assets. Short-term bills and notes should continue to lead the market as domestic and foreign investors look to pretty up their balance sheets with liquid assets prior to year-end reporting requirements. "This rush to safety occurred last year, too, when investors wanted only to own the very safest, most liquid investments when they closed their books at the end of the year." (WSJ.com)
According to Strategic Alliance Mortgage, as of 4:35 pm EST, the yield on the 2-year note had climbed upwards by four bps to 0.877%. The yield on the 10-year note surged 8 bps to 2.706%. The 2-year / 10-year spread widened out to 1.828% from 1.800% last week. As Treasuries rose, demand pushed "rates on the three-month bill negative for the first time. If you invested $1 million in three-month bills at today's negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56," Bloomberg.com reports.
"Futures contracts on the Chicago Board of Trade show 100 percent odds the Fed will lower its 1 percent target rate on overnight loans between banks to 0.25 percent on Dec. 16. The probability was 38 percent a week ago. The Treasury will sell $28 billion of three-year notes tomorrow and $16 billion of 10-year notes the following day."
Watchdogs Chide Treasury on Bailout
WSJ.com reports, "U.S. Treasury Department assurances that the $700 billion financial rescue plan is helping to stabilize markets aren't enough for a program that has been implemented with few internal controls, a pair of government watchdogs said Wednesday.
In separate testimony, the Government Accountability Office and a congressional oversight panel said Treasury has doled out billions of dollars to banks with no way to ensure they comply with government-mandated restrictions, or they are using the money to help increase the availability of credit to consumers.
The four-person oversight panel, in its first report to Congress, said it found Treasury has "administrated the [Troubled Asset Relief Program] without seeking to monitor the use of funds provided to specific financial institutions." (Read the full oversight panel report)
"Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify," the 38-page report said."
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| Please contact the Capital Markets Group at Colliers Meredith & Grew with any financing questions.
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Colliers Meredith & Grew is a Boston-based commercial real estate company with integrated service groups including Brokerage, Capital Markets, Counseling & Valuation, Development & Advisory, Investment Sales, and Property & Asset Management. In addition to representing its core clients in New England, Colliers Meredith & Grew provides national and international real estate services to its multi-market clients as a member of Colliers International and as an owner/member of Strategic Alliance Mortgage LLC (SAM). Colliers International is a worldwide affiliation of independently owned and operated companies in more than 290 offices in 61 countries. |
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