{"id":1004093825,"date":"2014-04-02T09:28:18","date_gmt":"2014-04-02T17:28:18","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004093825"},"modified":"2022-12-08T23:05:50","modified_gmt":"2022-12-09T07:05:50","slug":"whither-goest-interest-rates","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/whither-goest-interest-rates\/","title":{"rendered":"Whither Goest Interest Rates?"},"content":{"rendered":"<p><em>By Robert Bach, National Director of Market Analytics, Newmark Grubb Knight Frank<\/em><\/p>\n<p align=\"center\"><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/10\/Bob-Bach-new-photo1.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004048576\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/get-the-hook-five-things-buyers-and-sellers-need-to-know\/bob-bach-new-photo-4\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/10\/Bob-Bach-new-photo1.jpg\" data-orig-size=\"2500,2767\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;1267023058&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;}\" data-image-title=\"Bob Bach new photo\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/10\/Bob-Bach-new-photo1.jpg?w=925\" class=\"alignleft size-thumbnail wp-image-1004048576\" alt=\"Bob Bach new photo\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2012\/10\/Bob-Bach-new-photo1.jpg\" width=\"150\" height=\"150\" \/><\/a>\u00a0Common wisdom among economists is that if you forecast a specific number, don\u2019t forecast the date when that number will occur, and vice versa. This applies to interest rates. I am 99.9 percent certain the yield on the 10-year Treasury note will hit 5 percent, but don\u2019t try to pin me down on the date. I\u2019m willing to go on record that it won\u2019t be this year, and I\u2019m also going on record that the 10-year yield will end 2014 higher than 2.73 percent, where it was perched on March 31. I might get more specific at the end of this article if you twist my arm.<\/p>\n<p>The reason I don\u2019t like to be pinned down is that the 10-year yield and its sidekick, inflation, have confounded analysts throughout the recession and recovery, now approaching the end of its fifth year. Early in this cycle, the favored scenario among many was that the Treasury Department and Federal Reserve would have to pursue a policy of low interest rates\/high inflation so households, businesses and governments could repay their massive debts from the financial crisis with inflated (less valuable) dollars \u2013 the ultimate bailout. But it didn\u2019t turn out that way. Despite stimulus packages and rounds of quantitative easing to keep interest rates low, inflation remained tame and in fact has fallen below the Fed\u2019s target rate of 2 percent for the past two years. Meanwhile households and businesses have shed their excess debt while the federal government\u2019s deficit has returned to historical norms thanks to sequester-mandated spending cuts and improving tax collections \u2013 all without any whiff of inflation.<\/p>\n<p>Some financial analysts developed a following by hammering the Treasury Department and Fed for their unconventional policies, which, they argued, would trigger higher (if not hyper-) inflation or, even worse, another round of financial contagion spreading through global markets. These analysts sought to attract defensive-minded clients who had been hurt by the financial crisis and were willing to believe that the U.S. and\/or European governments were setting the stage for another one. These analysts convinced their clients to hedge against this risk just as the Fed was setting the table for a raging bull market in home-grown, garden variety stocks.<\/p>\n<p>What, you might ask, does this have to do with commercial real estate? Our industry owes a tip-of-the-hat to ex-Fed Chairman Bernanke who, though he was slow to recognize the gathering storm clouds, was quick to embrace strategies that delivered the dramatic recovery of property prices and the more measured recovery of leasing markets, which promise to gain momentum this year. I\u2019ve read articles recently suggesting this period of low inflation and interest rates could go on for years. Just remember, however, that nothing lasts forever: not the financial monster that nearly swallowed the world, nor the economic stability that has endured for the past five years, earning strong returns for investors in stocks and real estate.<\/p>\n<p>Fortunately for analysts who go out on a limb, people tend to have short memories. So, despite my description of the pitfalls, let me risk answering the question posed in the title of this piece. The 10-year Treasury yield will end the year around 3.5 percent, about 50 basis points higher than where it began the year. This will signal both an improving economy and a return of inflation back to the Fed\u2019s target level of 2 percent. But if I\u2019m wrong, I don\u2019t want to hear about it. Deal?<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Robert Bach, National Director of Market Analytics, Newmark Grubb Knight Frank: Common wisdom among economists is that if you forecast a specific number, don\u2019t forecast the date when that number will occur, and vice versa. This applies to interest rates. <\/p>\n","protected":false},"author":1234,"featured_media":1004048576,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004093825","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v24.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Whither Goest Interest Rates? - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/whither-goest-interest-rates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Whither Goest Interest Rates?\" \/>\n<meta property=\"og:description\" content=\"By Robert Bach, National Director of Market Analytics, Newmark Grubb Knight Frank: Common wisdom among economists is that if you forecast a specific number, don\u2019t forecast the date when that number will occur, and vice versa. 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