September Market Rate Update
Each month, the IAACU Small Business Team aims to provide you with insights into the current trends in Commercial Real Estate market rates, which are influenced by movements in the US Treasury yield.
As we move into September, there's a noticeable shift in the outlook for the economy and inflation. The latest data continues to support the Federal Reserve's goal of achieving a "soft landing" for the economy. In simple terms, all we can do now is wait and see if the Fed’s strategy for rate cuts and maintaining elevated rates was the right call. One thing is clear: discussions about whether the Fed might raise rates again to combat inflation have largely disappeared.
Over the past month, the 5-year US Treasury rate has remained above the 3.62% floor it established on August 2nd, while also staying below the 4% mark, where it had spent most of the year until recently. Given this trend, we anticipate that the 5-year US Treasury rate will likely dip below its previous 3.62% floor and establish a new one, possibly between 3.35% and 3.50%. Even if it bottoms out around 3.35%, it’s expected to remain within a new range of 3.50% to 3.80%. The next 30 days will be crucial in determining whether rates will continue to decline or if the market has already priced in the expected rate cuts, setting the stage for rates to stabilize within this new range.
If this projection holds, we can expect Commercial Interest Rates on Equipment and Commercial Real Estate loans to stay within a range of 6.25% to 7.25%, depending on factors like credit risk, collateral, and cash flow.
Read our August Market Rate Update.
*Rates from Resource Center | U.S. Department of the Treasury as of September 4, 2024.
