While REITs’ unit prices often take their cue from risk-free rates and their yield spread, operationally, S-REITs are likely to be stuck with the higher-for-longer scenario.
The interest rate hike cycle appears to be done and dusted with the Federal Funds Rate possibly topping out at 5.25% to 5.5%. The first Federal Open Market Committee (FOMC) meeting is on Jan 30-31. Further movement on the FFR is unlikely although markets will pay close attention to the FOMC minutes to divine when rates could start to fall.
Risk-free rates (the yield on 10-year US treasuries) have been on something of a roller coaster ride, falling to as low as 3.8% in the closing days of 2023 but rebounding to above 4% in the first week of 2024.
