Highlight of the Week
Debt Ceiling Hopes Lifted
- 10-year treasuries dropped 12 bps on Tuesday after news over an ‘in-principle’ agreement on the debt ceiling was reached.
- Market reactions remain mixed as the measure has not passed through Congress. On Friday, Treasury secretary Janet Yellen reaffirmed the X-date would be June 5th with over $130 billion in scheduled payments being due on the first two days of June.
- The consensus surrounding the legislation is that the spending cuts do not impose any sufficient restraints that would trigger a recession or change the current macroeconomic outlook.
- Tech stocks and the NASDAQ composite have seen recent bumps as excitement around Artificial Intelligence has driven stocks higher amid the debt ceiling negotiations.
Rate Curves
Rapid Report:
- Per our February 22nd report, we covered the rise in CRE delinquencies rates for Q4 ‘22. Figure 1 shows where the last 5 quarters of percent change fell in terms of their quarterly distributions.
- The CRE delinquency rate remains at historic lows and well below the average of 3.78%. However, continued interest rate hikes have created a challenging environment for commercial loans and could push delinquencies higher in the coming year(s).
- Figure 2 illustrates the volatility of Q-o-Q changes through 2006-2010 leading to delinquency rates peaking at 10% in Q1 of 2010. How fast the rates could reach these levels will depend on the current trend of double-digit Q-o-Q increases sustaining throughout the next year and the severity of the anticipated recession.
