|
| Weekly Interest Rate Tracking |
| August 12, 2008 |
Good Morning,
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 (100KB)
The following Market Perspective provides insights and commentary on breaking news and emerging trends in commercial real estate finance.
- Bloomberg: Treasuries rose this morning as concern credit-market losses are deepening fueled demand for the relative safety of government debt. Bond yields fell after JPMorgan Chase & Co. said it will write down the value of mortgage-backed assets by at least $1.5B this quarter. The yield on the 2-year note dropped 3 bps, or 0.03%, to 2.52% as of 8:02 a.m. in New York, according to BGCantor Market Data. The benchmark 10-year note's yield fell 3 bps to 3.97%. Treasuries pared gains after Russian President Dmitry Medvedev ordered a halt to the country's military action in Georgia, defusing a dispute that threatened to draw in the West.
- Bloomberg: U.S. notes have advanced as traders bet Federal Reserve policy makers will keep the benchmark interest rate at 2% this year. Futures contracts on the Chicago Board of Trade show the odds that the central bank will keep the rate unchanged through December rose to 52% in New York from 39% a week earlier.
- Financial Times - Ominous signs for CMBS outlook: According to a Moody's report published on Monday, the total number of loans on watchlists in Europe leapt sharply to 68 over the past 3 quarters, about 10% of the more than 660 European commercial mortgages that Moody’s monitors in CMBS deals. “Given that more than 50% of all loans currently on watch are in breach of coverage or loan-to-value covenants, the number of loans defaulting and/or moving into special servicing is expected to increase over the next couple of months and quarters,” the report said. Moody’s said that more than 50% of loans on servicers’ watchlists were in CMBS transactions that closed in 2007, 35% in transactions from 2006 and 13% in transactions from 2005. Watchlists are an early indicator of potential events of default or transfer to special servicing, which sees commercial property experts move in to explore the best ways to cure a mortgage’s troubles or look at options for a work-out or sale.
- Drudge Report / AP: Oil prices fell Tuesday in Asia to a 3-month low as a stronger dollar and weakening crude demand from China weighed on investor sentiment. Light, sweet crude for September delivery fell $1.45 to $113 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. The contract lost 75 cents overnight to settle at $114.45, the lowest close for a floor session since May 1. A report from China on Monday that the country's crude oil imports in July were down 7% from last year fueled expectations that the economic slowdown affecting the U.S. and Europe may be spreading to Asia and cutting demand for oil. A stronger dollar is also pushing prices down. The euro fell Tuesday to $1.4894, while the dollar was holding near 110 yen. A weak dollar helped boost oil prices earlier this year, because dollar-denominated commodities are often used as hedges against inflation and a falling U.S. currency. But gains in the currency are reversing that trend. NYMEX crude is down about $33, or 22%, from its high of $147.27 on July 11.
- First Trust Advisors L.P.: Between Sep. 2007 and Apr. 2008, the Fed's massive shift in Federal Reserve policy toward loose money added enough dollar liquidity to drive the federal funds rate down from 5.25% to 2.0%. While it is true that these lower rates helped some adjustable-rate mortgage holders avoid re-sets to higher rates, while other borrowers experienced a reduction in borrowing costs, these benefits came with a huge cost. Last August 16th, the day before the Fed cut the discount rate by 50 bps at an emergency meeting, oil traded at $68.54/bbl. By July 2008, oil prices had increased to $146.13/bbl., up 113% in less than a year. As oil prices soared, airlines bled cash and car sales plummeted. Moreover, inflation has eroded consumer confidence about the economy, the future and elected politicians. The Fed’s excess money creation also caused the dollar to fall sharply in value on foreign exchange markets. In addition, there are always two sides to every economic coin. Any benefits from lower interest rates have been offset by significant costs to lenders. Bank loans tied to the prime rate were reduced. Good for the borrower, but bad for the bank. Lenders were forced to take lower payments, while both economic risk and inflation were rising. No wonder bank stocks (even with no subprime exposure) have been hurt so badly. In addition, Auction Rate Securities, which are often indexed to LIBOR, saw their yields fall as the Fed cut rates. It’s not a coincidence that auctions failed when buyers balked at the lower yields. Lower interest rates also hurt retirees dependent on fixed incomes, while they undermined the fixed income marketplace, enlarging losses on fixed income portfolios that were marked to market. All of this is to suggest that the costs of the Fed’s sharp interest rates cuts have been large. In fact, they may have contributed more to current economic problems than the subprime crisis itself.
|
| Please contact the Capital Markets Group at Colliers Meredith & Grew with any financing questions.
|
|
|
|
|
|
Colliers Meredith & Grew respects your privacy. If you prefer to be removed from our distribution list, please click here to unsubscribe. A copy of our privacy policy can be found on our website.
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. |
|
