Chris Moore explains in the Real Deal how interest rate hikes affect interest rate swaps and caps
Chris Moore in The Real Deal
“Generally speaking, swaps that were executed earlier in the year are going to be in the money now.”
“Generally speaking, swaps that were executed earlier in the year are going to be in the money now,” said Chris Moore of the capital advisory firm Chatham Financial, who added that rates have not been going up in a smooth, predictable fashion. “There’s a great amount of day-over-day volatility.”
Big landlords such as Vornado Realty Trust, Blackstone Group and SL Green started the year with large amounts of variable-rate debt that became a major headache when the Fed declared war on inflation in March and started jacking up interest rates.
The cost of interest-rate caps has grown more than tenfold since the start of the year, and it’s now a significant cost for many players. And with the drumbeat of recession growing louder, a drop in interest rates could turn interest-rate swaps from an asset into a liability.
Our interest rate risk expertise
Interest rate risk can be an important factor in the performance of a single real estate asset or a portfolio of properties. Chatham’s interest rate risk management advisory services offer the expertise and knowledge you need to make informed decisions about the type of debt you use and how you manage the interest rate risk associated with that debt, whether it’s risk on current floating-rate debt, refinance risk on fixed-rate debt, or risk on prepayment penalties.
With Chatham on your side, you can be confident that you’re getting the best possible terms, while maintaining the integrity of your all-important banking relationships. We provide complete guidance on strategy and execution, along with access to tools for monitoring the hedge for the life of the transaction.
Our highly experienced professionals, supported by industry-leading technology, ensure the best pricing, maximize transparency, and offer you insights into market trends.
Our featured insights
Expert Conversation with Matt Henry and Rob Kaplan
Matt Henry, Chatham's Managing Partner and CEO, and Rob Kaplan, former President and CEO of the Federal Reserve Bank of Dallas, discuss the economy, alternative capital sources, interest rates, and more.
BoE holds rates steady again while ECB pauses record run of hikes
The Bank of England (BoE) kept rates on hold at 5.25% for a second consecutive meeting today, as it attempts to balance a weakening economy with inflation that is still measuring three times its target. The Bank's updated forecasts show medium-term inflation slightly higher than in August's...
Jackie Bowie discusses the Bank of England's interest rate decision on Sky News
Business Live host Ian King interviews Jackie Bowie about the Bank of England's November interest rate decision. Will the decision follow the consensus of pausing the interest rate hike, or will the Bank continue rising?
Fed holds rates steady while noting tighter financial conditions
On Wednesday, November 1, 2023, the Federal Open Market Committee (FOMC) voted unanimously to hold the fed funds rate at a target range of 5.25%–5.50%. Today's pause represents consecutive FOMC meetings with no rate change, having hiked in 11 out of the last 14 prior meetings. The most notable...
Jackie Bowie reviews the 10-year Treasury and interest rates on Bloomberg Daybreak Europe
Bloomberg Daybreak Europe interviews Jackie Bowie about the Bank of England's November interest rate decision. With the U.S. refunding announcement in focus alongside a headwind of geopolitical risk, there have been negative views impacting sentiment as more people are paying attention.
ECB hikes 25 bps while BoE keeps rates steady
The Bank of England (BoE) announced it would keep rates on hold at today's meeting, following 14 consecutive rate hikes that have taken borrowing costs to 5.25%, the highest level since 2007. A 25-basis-point rate hike was expected at the start of the week, but the release of August inflation...
BoE hikes 25 bps and warns more to come, while ECB cools on a September hike
The Bank of England (BoE) raised borrowing costs by 25 basis points at their meeting today, a smaller hike than their June meeting following better-than-expected data. However, two policymakers voted for a 50-basis-point increase. The BoE's statement warned that some of the upside inflation risks...
FOMC increases rates by 25 bps to 525–550 bps range, reflecting 22-year high
On Wednesday, July 26, 2023, the Federal Open Market Committee (FOMC) voted unanimously to raise the fed funds rate to a target range of 5.25%–5.50%. Following a pause in rate hikes at the prior meeting, this increase elevates the fed funds target to its highest level since 2001 and was...