Treasury Swings Are Not Stopping CRE Lending Article originally posted on Globe St. on July 21, 2026 Commercial real estate lenders are keeping credit lines open even as Treasury yields lurch higher, a combination that is helping to support sales activity and keep borrowing costs in check for many borrowers, according to Cushman & Wakefield Senior Economist Adrian Ponsen and Federal Reserve data. The core dynamic is that banks and other lenders are still growing their CRE portfolios fast enough to offset rate volatility, leaving spreads “borrower friendly” even as the broader rate environment turns choppier, according to Ponsen. Treasury Yields Break Out Of Their Range Five-and-10-year Treasury yields had been relatively steady through late 2025 and early 2026, creating a period of rare calm for rate-sensitive CRE investors, according to Ponsen. That calm ended with the onset of the war in Iran on February 28, which pushed yields roughly 55 to 80 basis points above their February lows as markets repriced geopolitical risk and the path of inflation. The jump in yields has been fueled by concerns that inflation could re-accelerate rather than glide back to the Federal Reserve’s 2 percent goal. Hopes that a Memorandum of Understanding would pave the way for a negotiated settlement in Iran have faded amid repeated restarts of hostilities, adding to the uncertainty. At the same time, gasoline prices have surged since mid-February, with the AAA now putting the national average for regular at $4.002 per gallon and diesel at $5.14, as of today. Both are up from a week earlier, with prices particularly volatile over the past month. Fuel Costs, Inflation Data And Fed Signals Rising fuel costs have been a major driver of inflation pressures, even as some headline indicators have recently surprised to the downside. New Consumer Price Index data released July 14 showed headline inflation falling 0.4 percent month-over-month and easing to 3.5 percent annually, down from 4.2 percent in May. The Personal Consumption Expenditures Price Index, the Fed’s preferred gauge, showed year-over-year inflation at 4.1 percent in May and may have cooled in June, according to the same data set. Despite that improvement, Fed officials are not yet ready to declare victory. In recent testimony, Fed Chair Kevin Warsh said there is still a credible case for inflation to move back toward 2 percent with current policy, but he also warned there is an “equally plausible” outcome in which inflation stays elevated or drifts higher in coming months. Futures markets reflect that uncertainty: the CME Group’s FedWatch tool shows traders assigning roughly a 63.2 percent probability to a federal funds rate increase by the Federal Open Market Committee’s September 16, 2026, meeting. In most cycles, a sustained rise in Treasury yields quickly feeds into higher borrowing costs and, eventually, weaker CRE pricing as buyers re-trade deals and lenders widen spreads. This time, Cushman & Wakefield notes that there have been “very few signs” that the recent uptick in Treasury rates has damaged sales pricing, suggesting that other forces are offsetting the rate shock for now. Liquidity Keeps Pricing And Spreads Intact Those forces largely come down to liquidity. According to Ponsen’s analysis of Fed data, commercial banks’ total CRE loan portfolios grew by about 1.9 billion dollars per week between March and June, nearly double their average weekly growth in 2025. That acceleration in on-balance-sheet lending has allowed many lenders to keep spreads tight enough that all-in borrowing costs have not risen as much as Treasury moves alone would suggest, leaving terms comparatively “borrower friendly,” according to Ponsen. For investors, the combination of higher base rates and still-supportive lending terms creates a nuanced environment. On one hand, higher risk-free yields raise the hurdle rate for new acquisitions and refinancing, especially for levered buyers. On the other, the willingness of banks to continue growing CRE exposure at an above-trend pace suggests confidence in asset performance and provides a buffer for valuations that might otherwise come under sharper pressure. The result so far is that transaction pricing has proven more resilient than many market participants expected when Treasury volatility first picked up. This resilience will be tested if inflation surprises to the upside again or if the Fed follows through on additional policy tightening into the fall. But for now, the key takeaway for CRE investors is that the capital stack is still functioning. Lenders are open for business, spreads remain competitive by recent standards, and Treasury volatility alone has not yet been enough to derail sales or reset pricing in a meaningful way.