Market Uncertainty Persists

While the yield curve "un-inverted" a couple weeks ago, market odds of a recession in the next year are up to 30%.  Fed minutes from last meeting are signaling aggressive balance sheet reductions starting as early as next month.  With the treasury rate having climbed over 1.0% since the start of this year, loan proceeds are harder to come by with lenders underwriting off of actual coupon rates - now in the high-3%'s to 4%'s.  Finding creative ways to push their underwriting to maximize proceeds has become important. 

Banks, Credit Unions, and alternative lenders are winning deals today as their rate increases have lagged behind Life Companies, CMBS, and the Agencies.  Interest-only periods have become a way some lenders are still differentiating, offering up to 5-years for 5-10 year fixed terms.  For bridge loans, SOFR Cap costs have continued to soar. Negotiating creative cap structures with preferential term and laddered strike rates can help keep this cost down substantially.  While a start rate on floating bridge loans today may be below 4%, the SOFR forward curve implies this same rate could be floating in the 5%'s within the next 6 months.