A widely watched bond market indicator sent its strongest recession warning in more than a decade on Wednesday, as the global growth outlook dimmed and questions swirled about the Federal Reserve’s commitment to cut interest rates in light of rising US-China trade tensions. The yield on three-month US Treasury traded as much as 41.23 basis points above that on the benchmark 10-year government bond — the widest gap since March 2007. Such an inversion of the yield curve — in which short-term yields are higher than longer-term ones — has preceded every recession of the last half century.
The dramatic scramble for U.S. debt as a safe haven has pushed a bond market recession indicator inches away from the warning zone. The yield on the 10-year Treasury note — an important rate banks use when setting mortgage rates and other lending — is in free fall, plunging more than 40 basis points over the last month.
We’ve seen cap rates compress up to 40 bps in the past few weeks. Buyers are acting extremely aggressive with offers and attempting and succeeding in locking in cheap debt. We are consistently receiving quotes from lenders sub 3.9% for non-recourse, 10-year fixed mortgages for retail properties in SWFL. While any inversion doesn’t guarantee a recession, “it’s a harbinger of elevated recession risks,” Bank of America’s Mark Cabana tells CNBC.
There are windows of opportunity that exist now that we are helping many of our clients take advantage of. Allow us to assist you by thoroughly examining your specific situation through our Complimentary Strategic Analysis for your property. Contact us directly to learn how you can maximize your position in the market.
2019 CNBC.