Market Commentary 10/23/20

The Treasury yield curve has steepened recently as various factors have pushed out longer-dated Treasuries (hopes of a vaccine, improving jobs data, and signs of inflation, e.g. copper prices). It’s not all bad news as higher rates suggest the economy may be improving and more stimulus may be on the way. The Fed has already been clear about letting inflation run above the 2% target. Should inflation and or interest rates move up too far expect the Fed to implement yield control measures to push longer-dated Treasury yields below 1%.  

Housing has been on an absolute tear as both new and existing home sales constrain supply. Normally, you’d think a large ticket item such as buying a house during a global pandemic would be counterintuitive, but it appears that Covid-19 has nudged fence-sitters into action. Low-interest rates have definitely been helping this trend, with rates below 3%. Rates as low as 2% for high net worth borrowers are readily available. Big business has also benefited from the low rate environment, especially companies that can access the public debt markets. By lowering the cost of debt, companies will allocate debt service funds on innovation or share buybacks once Covid-19 is in the rearview mirror.  

Insignia’s funding sources remain fairly optimistic as borrowers have been able to rebound from the gut-punch they took in March. Our lenders continue to work with our borrowers on loan approvals and fast closings for purchases. More opaque products such as interest-only loans, investment property loans, and loans for foreign nationals are also available. The rate for these products begins in the low 3% range and moves up from there.  

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