Yields Continue to Grind Higher

Rates climb higher once again in spite of weak jobs report, delta-driven growth fears. Swap rates and Treasury yields continued their grind higher today, impervious to the growth fears that pulled stocks and other risk assets lower. Some participants have attributed the increase in rates to the $165B in combined Treasury/corporate issuance set to take place this week, while others have suggested that US rates are simply following their European counterpart(s) higher. Whatever the reason, 10-year rates are now 15 basis points above the recent lows- the 10-year Treasury yield closing 5bps higher on the day at 1.14%.

CRE lending is picking up steam in Q3. Commercial real estate lending continues to roll in Q3 with small U.S. banks (banks outside the top-25 in total assets as of 6/30/2021) leading the charge. CRE lending has continued to improve quarter-over-quarter in 2021 at small banks with Q3 QTD annualized growth now outpacing YTD annualized growth at 6.59% compared to 5.89%. The momentum in CRE can also be seen at large U.S. banks (banks in the top-25 of total assets as of 6/30/2021) after large institutions saw back-to-back weeks of positive CRE growth for only the fourth time this year.

Pandemic jobless benefits set to expire. Federal benefits from three pandemic-issued programs will expire in all 50 U.S. states with over seven million Americans losing their jobless benefits. An additional three million Americans will lose $300 of weekly state unemployment benefits. The expiration comes on the back of a jobs report that saw the slowest gains in seven months. The improving labor market was seen as evidence that the Fed may use their September policy meeting to make an announcement on tapering its $120 billion per month bond purchasing program.