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It has been a wild week for global bond markets. Long-term bond yields have skyrocketed, with U.S. 30-year Treasuries near 5% and UK gilts above 5.7%. Heavy issuance, stubborn inflation and mounting fiscal strain in the U.S., UK and France are driving a worldwide sell-off, while investors continue to be hesitant as they watch the debt-to-GDP ratios of developed economies tip further out of balance.
These numbers have clear consequences for commercial real estate, including more expensive debt, climbing cap rates and global investors second-guessing allocations. The question on everyone’s mind is: What does this mean for the long term?
To learn more, Bisnow Editor-in-Chief Mark Bonner sat down with Christopher Stanley, banking industry practice lead at Moody’s Analytics.
Stanley said the tightness of the spread shows increased competition in the market, but the entire yield curve has moved up considerably. That is going to hit net operating income, and Stanley said staying on top of liquidity and forecasting volatility all the way through the life cycle of the project have become crucial.
“When we’re in a nervous economy like we’re in right now, everyone immediately jumps to what kind of credit problems are there going to be,” Stanley said on the show. “Credit is a part of it, but we’re really playing a balance sheet management game.”
Watch the full conversation below:
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