How many times have you heard people talking about how cap rates are going to go up when the ten-year Treasury rate goes up? People who own commercial real estate have been pondering this question intensely most of this year.
What is the fear? That when the Fed begins to slow down their purchases of Treasuries, that long-term interest rates will increase and that cap rates will increase at the same time.
Well, long-term rates are going up. On May 2, 2013, the ten-year Treasury had a yield of 1.65 percent. Then the barometric pressure in the bond market started to fall dramatically when global bond investors first picked up signs of Tropical Storm Bernanke making its way toward the coast. This low pressure system hasn’t even formed into “Hurricane Taper” status yet. We don’t know if it will become a hurricane.
Read more...Are Cap Rates Correlated with the Ten-Year Treasury? | the Blog of the Real Estate Center
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