U.S. Treasury Yield Curve Nominal and Real Q1 2016 vs. Q4 2015
At the end of the 1st quarter of 2016, U.S. Treasury yields, on a nominal basis, were essentially unchanged for maturities of one year or less, but around 30 basis points or so lower for virtually all maturities in excess of this. On a real basis, yields were around 30 to 60 basis points lower for all maturities from 5 years to 30.
Interest rates affect commercial real estate in numerous ways (see this, this, and this). Borrowing costs are affected directly, with higher rates increasing borrowing costs and thus negatively affecting demand. Cap rates typically move with interest rates, albeit not in lockstep, with considered analyses generally seeming to conclude that cap rates on average move in the direction of 10-year rates, but only about a third as much. Interest rates affect the economy, which in turn affects vacancy and rents. In short, the interest rate environment is highly important to commercial real estate investment.
View more yield curve quarterly snapshots.