📢Good morning,

 Futures assign roughly 94% odds to a 25 bp cut this week and are pricing a total of 75 bps of easing by December. The 10-year Treasury slipped below 4.0% for the first time since April as bonds pre-trade the pivot, while stocks sit at record highs on cheaper-capital optimism.

📊 Quick Dive:

Wall Street coalesces around three cuts in 2025. Major forecasters, including Morgan Stanley and Deutsche Bank, now expect three 25 bp cuts by year-end (Sept, Oct, Dec), aligning with futures that imply the policy rate ends 2025 around 3.50–3.75%. A Reuters poll found 105/107 economists see a 25 bp cut in September and 60% anticipate at least one more by year-end; 37% expect 75 bps total . The shift followed weaker labor signals, including 911,000 jobs erased via revisions and unemployment at 4.3% . Street base cases stop short of a return to zero—Morgan Stanley projects ~3.5% by early 2026, then a pause. With alignment high, 2-year yields have settled near 4.3–4.4%, reflecting confidence in a measured easing path (Reuters).

Stocks at record highs as yields fall on Fed-cut optimism

The S&P 500 (6,512.61), Nasdaq (21,879.49), and Dow (45,711.34) closed at all-time highs on Sept 9 as investors bet on imminent Fed easing. The 10-year Treasury yield fell to ~4.03% by Sept 11 from ~4.3% in late August, lowering borrowing costs across fixed-rate markets. Breadth improved: the Russell 2000 rose ~1.8% last week and 10 of 11 S&P sectors advanced. Volatility remains muted, but valuations are stretched with the S&P forward P/E above 20x—levels last seen when rates were near zero. Equities up ~10–15% YTD underscore risk-on sentiment and a supportive backdrop for capital raising.

Fed easing seen thawing CRE credit; refi wall looks more manageable. CRE lending has been tight, with 2025 transaction volume ~16% below last year and 20% below the 8-year average. But green shoots are visible: CBRE’s Lending Momentum Index jumped +45% YoY in Q2, while debt funds’ share of originations climbed to 34%—nearly double five years ago. A heavy maturity calendar looms—63% of bank CRE loans by balance mature in 2025 and ~$151B of private-label CMBS comes due by year-end. A 50–75 bp rate decline can move borderline refis above 1.25x DSCR, “stopping the bleeding” on forced sales as pipelines reopen. Private-label CMBS issuance reached $37.2B through Q2, ahead of expectations, signaling investor appetite as rates ease

Sector split widens: multifamily and data centers resilient; office distress deepens. Multifamily remains fundamentally sound—~95% occupancy, ~+1.5% national rent growth despite a record 536,000 deliveries slated for 2025. Data centers are the standout: North American vacancy hit 1.6% in H1; ~73% of ~8 GW under construction is pre-leased, and large-block pricing exceeds $200/kW/month . Office distress is concentrated and severe: CMBS delinquency reached a record 11.66% in August, helping push the overall CMBS delinquency rate to 7.29%. Industrial remains exceptionally healthy, with CMBS delinquency at just 0.6%. A bright spot in office: owner-user deals—over 51% of H1 Bay Area office sales were user acquisitions, including Apple’s $365M and Nvidia’s $123M all-cash buys.

This is the turn operators have been waiting for—but it’s not a return to 2021. Use a base case of three 25 bp cuts through year-end and model short rates easing into the mid-3s by early 2026. Reprice refis and acquisitions with lower benchmarks, but keep DSCR cushions and assume only modest cap-rate compression; PIMCO and recent prints suggest this cycle stabilizes at higher lows than last decade.

Move now on near-term maturities and stalled-but-sound deals. Debt funds and agencies are open for business, CMBS is reawakening, and banks will re-enter selectively. Lean into resilient sectors (multifamily, industrial, data centers) where liquidity is deepest, and treat office as a bifurcated story—either truly best-in-market or a conversion/covered land play. Lock gains where you can, hedge tail risks, and negotiate lender floors and cap costs down while the window is open.