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Economy, the Fed, and Rates…

March 31, 2026

Economic Data

• The inflation shock is no longer hypothetical. Bloomberg Economics’ nowcast points to a very hot March CPI, with headline inflation tracking at ~3.4% y/y after 2.4% in February, driven by gasoline, with core goods also accelerating. The more important point is composition: this is no longer just oil. Computer accessories, autos, and apparel are increasingly becoming secondary pressure points.
• Iran war delivers a synchronized global growth shock. S&P Global March PMIs showed marked declines across manufacturing and services from Australia to Europe to the U.S. Such declines represent the first broad-based deterioration tied to the conflict now entering its fifth week. Input-cost inflation in Germany accelerated to its fastest pace in over three years. The IEA’s Fatih Birol has called this the greatest energy security threat in history, noting that more oil has been lost than in the twin shocks of the 1970s, and gas disruption exceeds what Europe lost after Russia invaded Ukraine.
• Consumer psychology worsened as the war dragged on. Final March University of Michigan sentiment fell to 53.3, below February’s 56.6, while one-year inflation expectations jumped to 3.8% from 3.4%. Bloomberg also notes economists raised year-end inflation forecasts while trimming growth, spending, and employment expectations.
• Import prices signal multiple inflation channels opening simultaneously. February import prices surged 1.3% m/m (vs. 0.6% est.), the largest monthly gain since March 2022. Ex-petroleum import prices rose 2.8% y/y, the fastest since mid-2022, and capital-goods prices excluding autos posted their largest monthly gain since the series began in 1988, led by computers, peripherals, and semiconductors. Critically, there is little evidence that foreign exporters are absorbing tariff costs by cutting pre-tariff prices, meaning U.S. importers are bearing the full burden of both tariffs and supply-driven price increases.

Federal Reserve Policy & Inflation Risk

• Markets execute a full 180 on the Fed. Swap contracts no longer price any easing in 2026 and assign a greater than 50% probability of a rate hike. This is a dramatic reversal from the start of the year, when two to three cuts remained the consensus. TD Securities noted the shift succinctly: Participants have gone from debating when the next cut arrives to pricing hikes. The last time the Fed raised rates was July 2023. That re-pricing proved short-lived: as Fed Chair Powell on Monday said longer-term inflation expectations remain well-anchored and the Fed can afford to wait, prompting traders to erase hike wagers and resume pricing a potential cut by year-end.
• The 1970s analogy is getting louder – and the risks are real. The Financial Times’ John Plender draws a direct line from Arthur Burns’s refusal to respond to the 1973 oil shock to the current dilemma: treat the supply shock as “transitory” and risk de-anchored expectations, or tighten into weakening growth, risking recession. The parallel extends to political pressure: Burns was intimidated by Nixon; Trump has vocally demanded rate cuts. Key differences today: the economy is less energy-intensive, labor bargaining power is weaker, and central banks are nominally independent.
• A long-war scenario would materially worsen the inflation problem. Bloomberg Intelligence says that if the Iran war lasts 18 months or longer and pushes crude above $150, the Treasury curve would likely flatten further, led by higher short-term inflation breakevens, and CPI could climb toward 8%.

Treasury Yields & Bond Markets

• Yields surged through most of the week, then reversed sharply as the market pivoted from inflation fear to growth risk. The 10-year hit 4.43% by Friday's close, with the 30-year reaching 4.96%. Yet, the 2-year fell on Friday and the move accelerated Monday as yields posted their largest single-day decline since August 2025. The 10-year is now at 4.35%, the 2-year at 3.83%, and the 30-year at 4.91%. The shift suggests the front end is now pricing growth and risk-asset damage rather than each incremental move in oil.
• Rising yields are no longer just a U.S. story. The 10-year German Bund is at its highest since 2011, and UK 10-year yields are back above 5%, reinforcing that this has become a broad inflation and duration event rather than a single-country move.

Commodities & Market Dynamics

• Hormuz is not just an oil story. The strait is a choke point for fertilizer, LNG, sulphur, and helium, not just crude. Helium matters because it is essential to semiconductors, which means the war can hit the tech complex through a physical-input channel, not just through rates.
• The macro regime is shifting toward “molecules matter.” The FT’s Gillian Tett argues the conflict is rewarding capital-intensive, asset-heavy businesses and exposing the fragility of capital-light models that still depend on industrial inputs, power, and logistics. That is relevant for AI, which cannot scale without data centers, semiconductors, transformers, and power infrastructure.
• Markets still look risk-off overall, even if individual hedges behave unevenly. On Friday, the S&P 500 fell 1.7%, the Nasdaq 100 moved into correction territory, Brent topped $112, and the Bloomberg Dollar Spot Index rose 0.2%. Gold rebounded that day, but the broader message is that investors are favoring liquidity and the dollar over any single classic haven.

CRE Finance Market Implications

• All-in CRE mortgage coupons remain elevated, but Monday’s rally argues for slightly less conviction on an immediate march higher. With the 10-year back to roughly 4.35% after Friday’s 4.43% close, fixed-rate CRE benchmarks are still materially worse than a month ago, even if the market may be nearing an inflection point as growth concerns reassert themselves.
• The oil shock hits CRE through at least three channels. First, construction input costs: energy-intensive materials (steel, concrete, asphalt, chemicals) face direct price pressure, compounding existing tariff-driven cost increases. Second, operating expenses: properties with significant energy footprints (industrial, data centers, large-format retail) face margin compression. Third, and most important, the inflation-to-rates channel: if the March CPI prints at 3.4% y/y and the Fed signals willingness to hike, the rate environment for CRE transactions deteriorates further. 
• Credit-market stress remains contained but bears watching. Private credit defaults at 2.5% and improving BDC distress metrics suggest no systemic crack, but the “equitification” of public credit – tighter correlation with equity risk sentiment and growing tech concentration – means a sustained equity selloff could spill over into CMBS and CRE CLO spreads faster than in prior cycles. Bank regulatory loosening may expand eventually into CRE lending capacity, particularly if changes in mortgage servicing capital treatment draw banks back into real estate credit. Near term, though, growth-inflation uncertainty is the binding constraint on new origination.

Sources: Bloomberg, Financial Times, Wall Street Journal, Federal Reserve, University of Michigan, BLS, S&P Global PMI, TD Securities.

You can download CREFC's one-page MarketMetrics, which includes statistics covering the economy and the CRE debt capital markets, here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

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CRE Securitized Debt Update

March 31, 2026

Private-Label CMBS and CRE CLOs

Six transactions totaling $4.9 billion priced last week:

1. BX 2026-ALOHA, a $1.24 billion SASB backed by a floating-rate, interest-only loan for Blackstone and its partners, DivcoWest and MW Group, to help finance the $2.3 billion take-private acquisition of Alexander & Baldwin (NYSE: ALEX), a Hawaii-based commercial property REIT. The collateral comprises 37 properties totaling 3.8 million square feet across four Hawaiian islands, including 20 retail assets (75.6%), 15 industrial assets (22.3%), and two office properties (2.1%). The loan has a two-year initial term plus three one-year extension options.
2. BSPRT 2026-FL13, an $880.4 million CRE CLO sponsored by Benefit Street Partners through Franklin BSP Realty Trust. The managed transaction's initial collateral pool comprises three whole loans and 41 loan participations secured by 90 properties across 17 states. The pool's top three property types are multifamily (83.8%), healthcare (7.3%), and industrial (7.1%).
3. BX 2026-RISE, an $845.2 million SASB backed by a floating-rate, interest-only loan for Blackstone and Cortland to refinance 12 garden-style multifamily properties totaling 4,922 units across six states. The loan has a two-year initial term plus three one-year extension options.
4. BANK5 2026-5YR21, an $836.7 million conduit backed by 31 five-year loans secured by 64 properties across 19 states from JPMorgan, BofA, Wells, and Morgan Stanley.
5. WFCM 2026-C66, a $586.4 million conduit backed by 29 ten-year loans secured by 49 properties across 21 states from a group of 10 lenders led by Wells.
6. PCY 2026-FCMT, a $465 million SASB backed by a fixed-rate, five-year loan for Simon Property and Institutional Mall Investors to refinance the Fashion Centre at Pentagon City and Metro Tower, a mixed-use development in Arlington, VA. The collateral includes a 647,000 square foot portion of the 866,000 square foot super-regional mall, a 168,000 square foot office building, and a ground lease beneath the 366-room Ritz-Carlton Pentagon City hotel.

By the numbers: YTD 2026 private-label CMBS and CRE CLO issuance totaled $47.4 billion, up 6% from the $44.5 billion for same-period 2025.

Spreads Hold Steady

• Conduit AAA and A-S spreads were unchanged at +80 and +105, respectively.
• Conduit AA and A spreads were unchanged at +145 and +205, respectively.
• Conduit BBB- spreads were unchanged at +450.
• SASB AAA spreads were up 4 bps across all property types, to a range of +115 to +184.
• CRE CLO AAA and BBB- spreads were unchanged at +145/+150 (static/managed) and +350/+360 (static/managed), respectively.

Agency CMBS

• Agency issuance totaled $2.2 billion last week, comprising a $1.3 billion Freddie K transaction, $576.1 million in Ginnie Mae transactions, and $272.1 million in Fannie DUS.
• Agency issuance for YTD 2026 totaled $43.5 billion, 38% higher than the $31.5 billion recorded for same-period 2025.
  

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Geopolitical Shocks & Market Volatility – CREFC Investor Forums Share Markets Updates

March 31, 2026

The CMBS and CRE CLO markets, which entered 2026 with significant momentum, have transitioned into a period of uncertainty. The escalation of conflict in the Middle East has recalibrated investor expectations and introduced a fresh layer of volatility into what was previously a normalizing market.

Market Sentiment & Macro Impact

The late-March "geopolitical shock" has triggered a classic "flight to quality," characterized by wider pricing on new deals and a marked increase in investor caution.

• The "Iran War" Effect: Market participants are closely monitoring the 5-year and 10-year Treasury yields, which have surged approximately 50 bps in the past month. Unlike the reactions seen during the Ukraine Invasion or "Liberation Day," the S&P 500 has seen a more measured drop of approximately 7%, suggesting the market may be pricing in a quicker resolution—though many bond investors remain skeptical of this optimism.
• Refinancing Friction: The sudden rate spike has created immediate friction for active deal pipelines. Borrowers may be reluctant to close loans at current levels, and some loans are being reworked to adjust for higher rates.
• Bifurcation: There is a divide in liquidity. While "trophy" assets like data centers remain resilient, we are seeing "credit dispersion" in the secondary market, where distressed sectors like Class B office and retail are widening significantly more than industrial assets.

Sector-Specific Performance

1. Conduit CMBS. Conduit products have recently "underperformed" relative to SASB and CLO structures as macro volatility rattles pricing.
   • Spreads: Benchmark AAA LCF (Last Cash Flow) spreads have widened from S +72 bps in early Q1 to the mid-80s by late March.
   • B-Piece Resilience: Feedback from the B-Piece Forum suggests that while yields tend to lag the broader market, buyers are reacting by "removing the marginal loan" from pools rather than just requiring wider yields. The mezz market remains a "deal-by-deal" environment with highly varied outcomes.
2. Single-Asset Single-Borrower (SASB). SASB remains the dominant force, accounting for nearly 75% of total private-label issuance.
   • Selectivity & Pauses: The market is open but more selective. Some SASB deals have been put on pause due to wider pricing. Investors are pushing back on AAA and BBB tranches, leading to deal delays when initial "test" pricing fails to find traction.
   • Data Center Strength: High-conviction sectors continue to drive volume, however, even these "gold standard" assets are seeing a shift toward shorter-term structures to navigate the current rate environment.
3. CRE CLOs. The CRE CLO market has seen a massive resurgence, with issuance reaching $11.2 billion by early March (up 34% YoY).
   • Collateral Shift: Multifamily remains the backbone (~70%), while office exposure has cratered to less than 3%.
   • Relative-Value Play: Interestingly, some investors are reportedly selling senior AAA CRE CLOs to pivot into Corporate CLO dislocations (driven by recent AI/Software sector news) as a total return play.

Asset Class Nuance: The Impact of Oil and AI

• Hotel Sector: Rising oil prices are expected to create a "K-shaped" recovery. Select-service hotels and those catering to lower-end demographics are viewed with increased concern as higher fuel costs squeeze consumer discretionary spending.
• Office & AI: While the Iran war has taken center stage, underlying anxiety regarding AI’s impact on long-term office employment remains a background headwind, adding to the structural uncertainty of the sector.

Capital Flow Observations

What’s Next. An Emerging Theme among Participants Is the Potential for "Capital Rotation." As noise increases in Private Credit (where asset values are perceived to be at "top-quartile" levels), there is an expectation that capital may flow into Real Estate Credit, where valuations are seen as having hit "bottom-quartile" levels, providing a more attractive entry point.

Bottom Line: The market remains open for transactions with strong fundamentals and realistic pricing expectations. However, for "tougher" deals or those with structural question marks, the current geopolitical environment has triggered a "wait-and-see" approach.

Contact Rohit Narayanan (rnarayanan@crefc.org) with any questions.

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Warren Targets Institutional Owners of Rental Housing, Including Multifamily

March 31, 2026

On March 27, Senate Banking Committee Ranking Member Elizabeth Warren (D-MA) sent letters to the largest corporate landlords in the single-family, multifamily, and manufactured housing sectors.

• The letters request data on their business practices, including landlord-tenant concerns and rental housing portfolios. 
• The companies may choose to respond to Warren’s requests, but they are under no current legal obligation to do so as the committee has not subpoenaed any of the companies.

Why it matters: Warren has long targeted private equity and institutional owners of all rental housing, not just single-family, and blamed them for higher costs and worse tenant experiences in the housing market. 

• Warren’s letter comes amidst the stalled effort to pass the 21st Century ROAD to Housing Act, which includes a provision to limit large institutional investor purchases of single-family homes. 
• The Senate passed the bill 89-9, but the House is negotiating changes before acting. Concern on the SFR piece include a forced divestment of new BTR homes after seven years. 

The big picture: Sen. Warren introduced “The American Homeownership Act” (S. 3904) legislation earlier this year, which directly targets institutional owners of all housing through the tax code. 

• While the legislation is unlikely to advance this Congress, the 20 Democratic co-sponsors demonstrate the overarching issue will likely remain a flashpoint for progressives. 
• The bill itself would limit federal real estate tax deductions and depreciation for large owners (50 or more SF units) and institutional investors, as defined by the statute. 
• The bill would also prohibit financing to those covered transactions.

What’s next: The individual companies may choose to respond to Warren’s probe, but the broader legislation and any hearings would likely not occur unless Democrats flip the Senate or House. 

Contact David McCarthy (dmccarthy@crefc.org) with questions.

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FSOC Proposes Changes to Nonbank “Systemically Important” Designation

March 31, 2026

On March 25, the Financial Stability Oversight Council (Council), an interagency forum of financial regulators chaired by Treasury Secretary Scott Bessent, issued a new proposal that would undo interpretative guidance changes made under the Biden administration. Comments are due in 45 days.

• The Biden-era revisions made it easier for the Council to designate nonbank financial institutions as systemically important.

According to Secretary Bessent:

• As reported by Politico, this proposal aligns with Bessent’s previously-stated priority of having the Council focus on economic growth, rather than “prophylactic” measures to prevent financial collapse.

The proposed interpretive guidance seeks to:

• Incorporate economic growth and security into the analysis of risks to financial stability;
• Prioritize identifying, assessing, and addressing risks through an activities-based approach;
• Commit to performing a cost-benefit analysis before a designation decision; and
• Provide a pre-designation “off-ramp” and promote greater transparency.

What they are saying: Council members voted unanimously to issue the proposed interpretative guidance for public comment. 

Federal Reserve Chair Jerome Powell, stated:

Yet, some policymakers shared their concerns that the proposal could make it more difficult for regulators to address future threats to financial stability.

Ranking member of the Senate Banking Committee, Sen Elizabeth Warren (D-Mass.), as reported by Politico, cautioned:

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Talking Filibuster Explained

March 31, 2026

The “talking filibuster” is being discussed by members of the GOP as a new legislative strategy as they gear up for a battle over the Trump-supported election reform bill, the SAVE America Act. 

For context: A “silent filibuster” is what we typically see in the Senate today.

• This occurs when a group of 41 or more senators threatens a filibuster, or opposes ending debate; in this scenario, the Senate majority leader will often decline to call a vote. 
• The Senate majority leader then typically works to pacify members and improve the vote count on the proposed legislation or alter the legislation to ensure it will pass.
  

Conversely, the talking filibuster is a process that would use Senate rules to allow debate to continue until filibustering senators (typically the minority party) can no longer hold the floor. 

The chamber requires three-fifths of the senators, or 60 lawmakers, to agree to wrap up debate and vote on the bill that is being debated. That’s where the filibuster comes in. 

• If Republicans voted as a bloc and did not close debate on the SAVE Act, or any other legislation for that matter, the Senate floor would remain open.
• The minority party (Democrats) would cease holding the floor either through exhaustion or Senate speech limitations, which govern what a Senator can and cannot say on the Senate floor. 
• If each Democratic Senator uses their allotted time for two 12-hour speeches, a talking filibuster could last 47 days. During that time, the Senate could not move forward on other business, such as bills to fund the government or advance nominations for administration positions or judgeships.
• If the Republican majority outlasted the Democrat minority speeches or exhausted enough Democrat senators to the point of ending debate, then a final vote on the SAVE America Act would take place at a simple majority threshold of 51 votes.
  

What they're saying: One of the supporters of the talking filibuster strategy is Congressman Chip Roy (R-TX-2), who implored his colleagues in the House to put pressure on the Senate to take this approach in an open letter last month. 

• Roy and others argue that current Senate rules allow them to do this, and do not require them to make any change to the legislative filibuster requirement of 60 votes that has been discussed in recent years.

What’s next: Regardless of opposition, support for utilizing the talking filibuster to pass the SAVE Act is likely to continue over the next few months. CREFC will monitor the situation for updates.

Contact James Montfort (jmontfort@crefc.org) with any questions.

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CREFC's February 2026 Monthly CMBS Loan Performance Report

March 30, 2026

CRE Finance Council has released a report on CMBS loan performance for February.* 

Key takeaways:
  
DELINQUENCY RATE DIPS AS LOAN WORKOUTS DRIVE IMPROVEMENT

• The overall CMBS delinquency rate fell 33 bps to 7.14%. Including performing matured balloons, the effective rate was 8.75% – a 161 bp gap that continues to reflect the refi friction defining this cycle. The drop was driven by modifications and extensions on five large matured office loans and four large mall loans, not clean cures or fundamental improvement.
• Office pulled back from January's all-time high, falling 114 bps to 11.20%; special servicing declined 82 bps to 16.29%. Both driven by extensions and rehabilitations, with terms ranging from one month to nearly three years – office remains the property type to watch.
• Retail sent mixed signals. Delinquency fell 74 bps to 6.30% (lowest since August 2024), but special servicing jumped 133 bps to 13.09. Retail accounted for 56% of February's $2.66B in new special servicing transfers – reinforcing the "two-speed" dynamic within the sector.
• Lodging reversed January's improvement (+38 bps to 5.94%); multifamily edged lower (-9 bps to 6.85%); industrial remains near de minimis distress (0.67%). The overall rate sits 84 bps above year-ago levels.

*Source: Trepp. CMBS data in this report reflect a total outstanding balance of $617.3B: 53.9% ($332.9B) conduit CMBS, 46.1% ($284.4B) single-asset/single-borrower (SASB) CMBS.
  
Click here to download the full report. Contact Raj Aidasani for more information on CMBS loan performance. 

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Banking Regulators Issue Long-Awaited Bank Capital Proposals

March 24, 2026 

On March 19, the banking regulators issued the long-awaited bank capital proposals, with comments due June 18, 2026. 

• CREFC and Mayer Brown will hold a webinar on Wednesday, March 25 at 3pm ET to cover the proposals’ key recommendations and our initial views on implications for CRE finance. Please click here to register.

The below two proposals were issued by all three agencies, the Federal Reserve Board, the Federal Deposit Insurance Corp (FDIC), and the Office of the Comptroller of the Currency (OCC):

• Proposed revisions to the risk-based capital framework applicable to the largest, most internationally active firms and to firms with significant trading activity (Basel III proposal)
  
• Proposed regulatory capital and standardized approach for risk-weighted assets (standardized approach proposal)

The G-SIB Surcharge proposal was issued by the Fed:

• Proposed risk-based capital surcharges for Global Systemically Important Bank holding companies (GSIB surcharge proposal)

The accompanying Board Memo states that the:

• Basel III proposal would revise the risk-based capital requirements that apply to the largest, most internationally active firms (Category I and II firms) and simplify the framework by subjecting firms to a single set of risk-based capital calculations;
• GSIB surcharge proposal would improve the measurement of systemic risk in the framework that determines the surcharge that applies to the largest and most complex banks; and
• Standardized approach proposal would revise the U.S. standardized approach, which applies to most banks, to better align capital requirements with the risk of traditional lending activities.

The regulators estimate the following capital impacts:

• Aggregate common equity Tier 1 capital requirements of Category I and II firms would decrease by 2.4% under the proposals (a 1.4% increase due to the Basel III proposal and a 3.8% decrease due to the GSIB surcharge proposal).
• The standardized approach proposal would decrease the aggregate common equity Tier 1 capital requirements of Category III and IV firms by 3.0% and of smaller banking organizations by 7.8%

Initial high-level takeaways for CRE:

• The standardized approach proposal recommends that risk weights for non-construction commercial real estate loans decrease from 100% to 95%. Table V.4: Impact on Risk-Weighted Assets on page 129-130 provides a summary of risk-weight impacts across assets.
  • Securitization risk-weights also would decline. Additionally, the proposal reduces the minimum risk weight for senior securitization positions from 20% in the current standardized approach to 15%.
  • The threshold-based deduction of mortgage servicing assets (MSAs) has been removed. All MSAs would receive a 250% risk weight under the proposal
• The Basel III proposal goes into significant detail on the treatment of CRE, including the definition of what constitutes regulatory commercial real estate exposures and accompanying risk-weights.
  • It allows for more granular capital treatment than the standardized approach.
    
  • Unfortunately, one of CREFC’s concerns related to the 2023 proposal reappears in this proposal: although common mezzanine/SPE financing structures are economically equivalent to first-lien lending, they continue to be penalized under a definition that requires a direct property security interest.

These proposals are the culmination of many years’ work to implement the 2017 international Basel agreement on bank capital requirements.

• In July 2023, the banking agencies jointly issued the notice of proposed rulemaking to implement the Basel III Endgame, which would have raised core equity Tier 1 capital for large and complex banks by 16%.
  • The banking industry fiercely opposed it, and it was never finalized.
  • The proposal also had negative implications for CRE finance, particularly given the onerous capital treatment of securitizations and warehouse lending. CREFC submitted a comment letter highlighting its concerns and led a joint letter from real estate industry groups.
• In September 2024, then Fed Vice Chair for Supervision Michael Barr announced a re-proposal attempt, but that effort stalled when President Trump took office and Barr stepped down.

What’s next: As noted above, CREFC and Mayer Brown, who is serving as drafting counsel on our comment letter, will hold a webinar on March 25 at 3pm ET.

Please contact Sairah Burki (sburki@crefc.org) with questions or if you want to join the CREFC Bank Capital Working Group.

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Economy, the Fed, and Rates…

March 24, 2026

Economic Data & Labor Market

• Largest oil supply shock in a generation redefines the macro backdrop. The Strait of Hormuz—roughly a fifth of global oil and LNG—remains near a standstill entering the war’s fourth week. Brent closed at $112/bbl (+~50% since February 28); WTI at ~$98. Saudi officials project prices could exceed $180 if disruptions persist into late April.
• The labor market is signaling weak hiring, not mass layoffs. Initial jobless claims fell 8,000 to 205,000 (lowest since January); continuing claims edged up to 1.86 million. Payrolls averaged just +17,000/month in January–February, and February showed a net loss of 92,000 jobs. Firms are not aggressively firing, but hiring is not strong enough to absorb another shock cleanly.
• Housing is no longer getting help from declining mortgage costs. New-home sales plunged nearly 18% in January to a 587,000 annualized pace—the lowest since 2022 and below all Bloomberg survey estimates. Mortgage rates have jumped the most in nearly a year over the past two weeks as the war repriced the rate outlook.
• Fiscal support is running against the growth scare. Roughly $200b from lower taxes and refunds, plus a potential $200b Pentagon supplemental, are hitting an economy that already was slowing (Q4 GDP decelerated to 0.7% annualized; February payrolls contracted 92,000). Whether demand stays firm enough to prevent easing—or soft enough to require it—is the central tension for the Fed.

Federal Reserve Policy & the Warsh Transition

• Fed holds at 3.50–3.75%; Powell’s framework - tariffs first, oil second. One dissent (Miran, favoring a cut). Powell conditioned any future ease on seeing tariff-driven goods inflation pass through—before even addressing energy. Core PCE is running at an estimated 3.0%, and non-housing services inflation has been stuck at ~3.5% for a year. The updated SEP raised 2026 PCE to 2.7% (from 2.4%); the median still shows one cut.
• Rate-hike talk surfaced for first time this cycle. Powell said “several” participants discussed the possibility. Globally, Australia hiked outright; the BOE voted unanimously to hold and scrapped forward guidance that the next move was a cut; the ECB’s Nagel suggested a hike as soon as April. Central banks can look through a temporary shock only if underlying inflation is behaving—and it isn’t.
• The Warsh transition remains a live complication. Powell will serve as chair pro tempore if Warsh is unconfirmed by May, and has no intention of leaving the Board while the DOJ probe continues. Senator Tillis is blocking Warsh’s confirmation vote; U.S. Attorney Pirro is appealing a judge’s rejection of Fed subpoenas. Bessent called Powell’s decision to stay contrary to historical norms. Treasuries hit session lows, and stocks posted their worst Fed-day decline since 2024 after Powell’s remarks.

Treasury Yields & Bond Markets

• Three straight weeks of higher yields; short end doing most of the damage. The 2-year closed at 3.90% (+53 bps over three weeks, +18 bps this week)—highest since July 2025 and now above the Fed’s 3.75% upper target bound for the first time since the hiking cycle. The 10-year hit 4.38% (+44 bps/3 weeks), the highest since August. The 30-year reached 4.94% (+33 bps/3 weeks), just 15 bps from its 52-week high of 5.09%.
• Market pricing has flipped from cuts to potential hikes. Zero chance of a 2026 cut is now priced in, having started the war with two cuts priced in. Futures briefly showed ~50% odds of a 25 bp hike by October, before settling around 27% by close (CME). Next cut priced: July 2027.
• The market’s real fear is duration of the war, not the one-week spike. Critically, 5-year/5-year forward inflation expectations have not broken higher the way they did in 2022. The damage is concentrated in front-end policy expectations, not a broad long-end confidence shock—yet. If long rates follow short rates higher, the pain for risk assets gets materially worse.

Dollar, Commodities & Market Dynamics

• Dollar rallies on safe-haven flows, reversing months of weakness. Bloomberg Dollar Spot Index +0.5% Friday. Bloomberg Intelligence notes an unusual pattern: large-cap tech and consumer stocks are rising alongside the dollar rather than getting hurt by it. Normally, a stronger dollar pressures companies with big overseas revenues, but investors are treating U.S. multinationals as a relative safe haven because Europe and Asia face a worse energy hit.
• Gold suffers worst week in four decades; traditional havens are failing. Gold fell 3.2% Friday to ~$4,502/oz. Bonds are losing value amid inflation, gold is falling on dollar strength, and equities are down. Money market funds have become the safe haven of choice, suggesting a sidelining rather than a structural reallocation.
• The supply shock is broadening beyond crude. Iranian attacks damaged Qatar’s Ras Laffan LNG plant (the world’s largest), with officials estimating it will take years to repair. European TTF natural gas is up 141% YTD. Fertilizer, helium, and sulfur blockages threaten industries from chipmaking to agriculture. Brent +94% YTD; gas oil +126%.
• Credit is not yet broken, but it is tightening. HY bond funds saw $3.65 billion in outflows (week ended March 18)—the largest since Liberation Day. An early signal that higher oil and tighter financial conditions are beginning to matter outside headline commodity markets.
• S&P 500 posts fourth straight weekly loss; Nasdaq nears correction. S&P 500 fell 1.5% Friday, now nearly 7% below its all-time high. Nasdaq down 2%, approaching a 10% decline from its recent peak. KBW Bank Index −9% YTD as stagflation fears hammer financials.

CRE Finance Market Implications

• The brief rate-relief window has closed again. Three weeks ago, the 10-year sat at 3.94% and markets priced two Fed cuts. Today: the 10-year is at 4.38% (+44 bps) and zero cuts priced.
• Floating-rate borrowers lose the relief they were counting on. The next Fed cut is now priced for July 2027. Borrowers who underwrote bridge and construction loans to a declining-rate glide path face at least 15–16 more months at current SOFR levels—or more if the hike scenario materializes. Refi risk intensifies for 2026–2027 maturities.
• Funding channels matter more than spot property fundamentals right now. If private credit turbulence persists while banks remain cautious, transitional assets dependent on nonbank capital will likely feel it first. Bank-capital easing is a genuine medium-term positive for CRE lending capacity, but the 90-day comment period and current macro uncertainty delay any near-term benefit.
• AI-driven office demand is a real but narrow bright spot. Manhattan’s AI leasing surge is filling mid-market space and pushing rents in previously weak submarkets—a positive for top-tier urban office. But the demand is geographically and concentrated on a sector basis, and the broader backdrop argues for caution outside AI/tech-adjacent drivers.
• Energy-cost pass-through hits the property stack from both sides. Oil above $100 raises operating costs and construction inputs simultaneously. If Brent sustains above $110–$120, development budgets will face meaningful upward revisions—particularly for energy-intensive types such as data centers and cold storage. Higher construction costs plus higher financing costs compress new-development returns from both ends.

You can download CREFC's one-page MarketMetrics, which includes statistics covering the economy and the CRE debt capital markets, here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

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