Mortgage Banking

Making sense of commercial real estate finance.

Lots of Movement

Posted by Jordan Crouch on March 17, 2008

  • On Friday, the investment bank Bear Sterns announces serious balance sheet problems. JP Morgan, with the help from the Federal Government, agrees to acquire Bear Sterns for the paltry sum of $2 per share on Sunday. The previous Friday the stock price was at the $30 level. It’s a steal by anyone’s estimation.
  • In order to calm the market amidst the chaos, the Federal Reserve lowered the Fed Funds rate this morning by 25 basis points. Expect to see another rate drop when the Fed meets on Tuesday.
  • Also expect more market fluctuation as several other major investment banks release earnings reports. They are not expected to be good.
  • Because of all this market turmoil investors are moving their money into US treasuries bills. This movement is raising the price of the T-Bills, which correspondingly lowers the yield. The lower yields are forcing lenders to increase their spreads on commercial real estate loans. Rates are still in the 6-ish percent range but the math to get to that rate is changing.

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