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| Weekly Interest Rate Tracking |
| August 19, 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 (191KB)
The following Market Perspective provides insights and commentary on breaking news and emerging trends in commercial real estate finance.
- Retreat to safety. Treasuries rose this morning, pushing yields on two- and 10-year notes to five-week lows, as stock losses bolstered demand for the safest assets. Bloomberg
- Dollar rising. Last week saw a huge shift in foreign exchange that marked the biggest USD rally (against the Euro) since the conception of the single currency, with big sales of the euro and commodity-backed currencies. That looks to have ended an extended period when it was safe to bet against the dollar. On a trade-weighted basis, the dollar is at its strongest in almost 6 months and has gained almost 8% since hitting a low in March. However, the dollar was down 0.5% today at $1.4768/euro from $1.4694 yesterday. It earlier touched $1.4631, the strongest since Feb. 20. Financial Times/Seeking Alpha/Bloomberg
- Oil rises more than $2 on weaker dollar, fuel supply forecast. Crude oil rose more than $2 a barrel as a weakening dollar prompted investors to purchase commodities as an inflation hedge. Oil and gold rebounded as the dollar fell against the euro from its strongest since Feb. 20. "At this stage the gyrations of the dollar are the primary movers of the oil market," said Nauman Barakat, senior VP of global energy futures at Macquarie Futures USA Inc. in New York. "The focus will remain on the value of the dollar against the euro." Crude oil for September delivery rose $2.37, or 2.1%, to $115.224 a barrel at 12:38 p.m. on the NYMEX. Futures touched a 15-week low of $111.34 a barrel on Aug. 15. Prices are up 60% from a year ago. Bloomberg
- 5-year Swap spread trades at more than 102 bps on risk aversion. Interest-rate derivatives are showing that investors are preparing for another round of turmoil in credit markets amid renewed concern that the U.S. will have to bail out Fannie Mae and Freddie Mac. "Risk aversion is continuing in the market," said an interest-rate strategist at BNP Paribas Securities Corp. "These firms really may very well be closer to insolvency than we thought." The five-year interest rate swap spread rose above 102 bps today, the spread is the premium charged over Treasury yields to exchange floating for fixed-rate payments. The spread moved above 100 on July 17th for the first time since March, then retreated later in the month. The spread peaked at 116 bps on March 6th, the most since at least 1988, when Bloomberg began compiling data. Swap spread movements usually reflect changing perceptions of credit risk and expectations of LIBOR. Swap rates are higher than Treasury yields in part because the floating payments are based on interest rates that contain credit risk, such as LIBOR. Bloomberg
- Fresh fears as Fannie & Freddie plunge. Fears about the financial system grew on Monday as money market liquidity tightened and sharp falls in the share prices of mortgage financiers Fannie Mae and Freddie Mac led the US stock market lower. Fannie's and Freddie's shares lost 22% and 25%, respectively, after an article in Barron';s suggested that the US government was considering recapitalising the companies on terms that would all but wipe out existing shareholders.
- Wholesale prices rising at fastest pace since '81. Wholesale inflation surged 1.2% in July, more than twice the 0.5% gain that economists expected, leaving prices for the past year rising at the fastest pace in 27 years, according to government data released Tuesday. The July price pressures reflected in part the big surge in energy costs during the month that pushed crude oil prices to a record of $147.27 per barrel and sent gasoline pump prices to an all-time high of $4.11 per gallon. Crude oil prices have fallen by more than $30 per barrel since then, raising hopes that the surge in inflation will soon abate. Economists now report that "a firmer dollar, retreating commodity prices and continued economic weakness should damp inflation by the fall." Such a development would put the Fed in a severe bind. The central bank would like to keep interest rates low to give a boost to the badly lagging economy, but Fed officials may feel pressured to start raising rates in an effort to make sure inflation does not get out of control. In other economic news, the Commerce Department reported that U.S. housing starts fell to a 17-year low in July. Drudge Report/AP
- Ex-IMF Chief says a large US bank to go under as credit crisis worsens. Harvard's, Kenneth Rogoff, a leading academic economist and former IMF Chief, said today that the deepening toll from the global financial crisis could trigger the failure of a large US bank within months, fuelling another battering for banking shares. In an ominous warning, he added: "We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one — one of the big investment banks or big banks," he said. The professor also sounded a warning over rising US inflation, which rose last month to its highest since 1991, and criticised the Federal Reserve for having cut American interest rates too drastically. "Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States," he said. Drudge Report/Times Online
- Colliers Meredith & Grew MarketView: Attractive construction financing options are few and far between. Selectiveness on the part of construction lenders is driven by the economic downturn and exit strategy concerns. Once funded with non-recourse capital, many transactions now require at least partial guarantees. In some cases, the economics of recourse options are sufficiently better that borrowers will tolerate the trade-off.
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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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