Treasuries Rally on Fiscal Policy Uncertainty

The end of the 30-year bull market in bonds may not be as “over” as was predicted in recent months. The 10-year T yield dropped to 2.31% and is now at 2.34% (after hitting highs over 2.60% in mid-December 2016). Bearish short bets on Treasuries have also been reduced in recent weeks. The markets are still waiting to see the expected stimulative fiscal policy from Washington. Details and consensus are not emerging as quickly as anticipated. Euro jitters are back: France’s upcoming election may result in a “Frexit” (France leaving the European Union) that could result in the dissolution of the Euro. The Greece debt crisis is also back in the news: Another restructure or bailout required to avoid default, but the political climate in northern Europe countries is increasingly opposed to such aid. This, along with the CMBS rally and tight spreads from portfolio lenders (Fannie, Freddie, Life Companies, etc.), are keeping all-in rates in the 4.00-4.75% range for new 10-year full leverage loans for solid properties. As you can see from above transaction, sub 4.00% financing is available for some 7-year terms. stay tuned.       David R. Pascale, Jr.