Markets were shaken last week as a weak July jobs report—along with one of the largest downward revisions in years—dramatically reshaped expectations for Fed policy. Nonfarm payrolls came in at just 73,000, while the BLS slashed prior months by 258,000, pulling the 3-month average down to just 35,000. The data landed just two days after a Fed meeting, raising questions about the timing and reliability of economic reporting.
As a result, the market is now pricing in a 90% chance of a rate cut in September, with 2.5 cuts expected by year-end. A 50-basis point move—like we saw last September—is now a real possibility.
Yield Curve Steepens Sharply
The weak jobs data triggered a bull steepener:
- 2-year swap rates fell 22 bps
- 10-year rates dropped 16 bps
Borrowers are eyeing the 5-year part of the curve as a sweet spot for fixed-rate deals, with hedging opportunities emerging before spreads widen.
Auction Strong; Fed Walks a Tightrope
Treasury auctions were well bid, and another round is coming this week—highlighted by the 10-year on Wednesday. Meanwhile, the Fed’s preferred inflation gauge (PCE) came in as expected, but Chair Powell signaled tariffs may be less inflationary than feared, hinting at a slightly more dovish tilt ahead.
CRE Lending Adjusts
Banks are pulling back on leverage, especially in the office sector, while private credit funds grow more active in multifamily and industrial. Borrowers with floating-rate debt are being advised to consider locking in now, as rate cuts loom.
Looking Ahead
This week brings a lighter data calendar (ISM, jobless claims, Fed speakers), but plenty of noise. With short-term yields falling and long-end inflation risk intact, the curve is steepening, and many see a tactical window to act on rates before volatility returns.
Jake Tillman, Senior Analyst
Jake Tillman is a Senior Analyst, Capital Markets at Defease With Ease | Thirty Capital, bringing 5+ years of experience specializing in financial modeling, debt structuring, and risk analysis for CRE transactions. He supports the execution of financing strategies, including CMBS, as well as interest rate hedging and capital markets transactions. With expertise in cash flow modeling, credit risk assessment, and market analytics, he provides data-driven insights to optimize capital structures and manage interest rate exposure. Jake assists in scenario analysis, transaction execution, and risk assessments, ensuring alignment with market conditions and client objectives. His technical background includes financial modeling, Bloomberg analytics, and structured finance evaluation.
