October 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.
Last month, we projected that the 5-year US Treasury rate would settle into a new range between 3.50% and 3.80%, with the potential for short-term fluctuations of +/- 10 basis points at either end. Looking back, this forecast was highly accurate. What we didn’t anticipate, however, was the upward trend that followed the Fed's 0.50% rate cut on September 15th. Almost immediately after the announcement, long-term US Treasury yields began to rise. Since then, we've seen the 5-year Treasury climb from 3.41% the day after the Fed's move, to 3.58% by September 30th, marking its highest close for the month.
As of October 7th, the 5-year US Treasury continues to climb, reaching 3.86%—a level we haven't seen since July. This upward shift suggests that barring any major market or global disruptions, the 5-year Treasury could push up to 4.00% or slightly higher, where we expect strong resistance. If this new, higher range (between 3.60% and 4.10%) holds, we anticipate that Conventional (non-SBA) Commercial Interest Rates on equipment and commercial real estate loans will also rise, ranging from 6.35% to 7.55%, depending on factors like credit risk, collateral, and cash flow.
That said, buckle up. With the next Fed meeting scheduled for November 6th-7th, expect increased volatility. There is no certainty about whether rates will remain within this new range or shift higher or lower.
What does this mean for you? If you're offered a loan rate with an affordable payment, lock it in now. Don't try to time the market. While many are predicting further Fed rate cuts, no one knows when or by how much, nor how the Treasury market (which drives the interest rates you and I pay) will react. Unforeseen events could still impact the market, so it's best to secure favorable terms while you can.
Read our September Market Rate Update.
Contact our Small Business Team.
*Rates from Resource Center | U.S. Department of the Treasury as of October 7, 2024.
