Markets opened the year quietly, with rates largely stable and limited data releases. The yield curve continued to steepen, driven by a sharper decline in short-term rates. Two-year swap rates are holding near 3.31% and are down about 77 bps year-over-year, while 10-year rates are down roughly 25–30 bps. The market is pricing in about 60 bps of rate cuts in 2026, with the first full cut not expected until mid-year, suggesting an extended Fed pause. Two cuts next year is viewed as a reasonable base case, contingent on inflation and labor market trends.
Recent jobless claims were strong, helping push long-term rates slightly higher. Attention now turns to non-farm payrolls and other labor data to set the tone for early 2026.
Funding markets remained calm through year-end, with tight credit spreads, smooth repo conditions, and ample liquidity. Issuance was light due to the holidays, and investors continue to focus on relative value strategies in a higher-coupon environment.
On the financing side, transaction activity by asset class remained consistent, led by multifamily, followed by retail, hospitality, and self-storage. A key theme in 2025 was the increased role of regional banks stepping in as institutional lenders pulled back. Borrowers have also shown more hesitancy toward CMBS, while debt yield has emerged as a growing underwriting concern alongside traditional debt service coverage.
Geopolitical and political headlines have had minimal market impact so far, with attention now shifting to upcoming economic data and Fed leadership developments.
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.
