I wanted to give everyone a bit of an update on where the market is at present……Since November 1st 2010, we have seen 5 year bond yields go from a low of 1.98% to yesterday’s high of 2.37%, a 0.39% increase in a very short period of time. Based on published rates (3.59%) spreads have been squeezed to 1.22% and down to 1.02% if you consider quick close specials presently at 3.39%-3.49%. Over the last 6 months spreads, based on published rates has been in the 1.65% to 1.75% range.
If we look at historical spreads over the last 6 months, existing published rates should be at 3.99% to 4.09%. Whether the spread compression at this level is sustainable, I can’t say at this time, however, we are well below this year’s average spread.
What does this mean for rates? Rates are artificially low for what the spreads are, and we don’t expect them to stay for much longer. Our 5 year quick close at 3.49% may not last very much longer.