Fed Meeting Update

Key Takeaways
Federal Reserve Press Release

The Federal Open Market Committee (FOMC) voted to increase the fed funds rate by 25 basis points, the first time the rate has been increased since 2018. It now stands at 3.50%.

Strong job gains, a falling unemployment rate, and "elevated" inflation were the Fed's reasons to increase the fed funds rate.

Russia's war on Ukraine is a key risk that may produce higher inflation and decreased economic activity.

The FOMC expects to begin reducing its balance sheet at some unspecified future meeting. They will be reducing their holdings of U.S. Treasury securities, U.S. agency debt, and U.S. agency mortgage-backed securities (MBS).

Treasury Yields Rise
Sam Goldfarb, Wall Street Journal

U.S. government bonds yields rose sharply Wednesday after the Federal Reserve said it would lift short-term interest rates and signaled they could reach nearly 2% by the end of the year.

In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 2.239%, according to Tradeweb, compared with 2.160% Tuesday. The two-year Treasury yield—which is especially sensitive to changes in monetary policy—was recently 1.989%, up from 1.855% Tuesday.

Yields, which rise when bond prices fall, had drifted higher earlier in the session but added to those gains immediately after the Fed released its latest policy statement.

William DeFanti of PSRS arranged $5.25 million in cash-out refinancing for a self-storage property in Ammon, Idaho. The subject property is comprised of 381 units. Given the lender’s comfort in the market and understanding of the lack of storage supply and high demand, the subject property leased up and stabilized within eight months. That timeframe is significantly ahead of schedule and superior to the national average lease-up time of 24-36 months, which proved to the lender that there was significant demand in the market despite the market’s tertiary location. Given how tight the market was, the lender was willing to provide $1 million of funds for 100% of Phase II development costs without seasoning on the stabilized income. PSRS was able to provide for its client a seven-year fixed-rate term with a 30-year amortization. The loan carries a 3.7% interest rate along with no prepayment penalty.