Federal Reserve and Falling Interest Rates

Fed Signals End of Tightening; Interest Rates Declining

•Federal Reserve suggesting no more rate hikes in 2018 and an end of balance sheet runoff

•10-year down 60 bps in the past 6 months – lowest level since December 2017

Interest Volatility Has Not Inverted Yield Curve

•Yield Curve Inversion: A common sign of upcoming recession though has had false positives in the past

•Spread between 2-year and 10-year has stayed consistent – no inversion yet but difficult to predict

Falling Interest Rates Sparks Opportunity

•Drop in interest rates increases yield spread, creating opportunity

•CRE performance outlook remains healthy with elevated capital market liquidity

•Deals that didn’t pencil 3 or 6 months ago may be feasible now – time to revisit