The sharp drop in interest rates over the past several months has not only lowered the cost of capital for borrowers, but it has also helped offset higher operating costs at a critically important time, say seniors housing lenders. At the close of business on Oct. 16, the 10-year Treasury yield — a benchmark for long-term, fixed-rate permanent financing in commercial real estate — stood at 1.75 percent, down about 125 basis points from the start of 2019. Meanwhile, the 30-day London Interbank Offered Rate (LIBOR), which is used to help set interest rates on construction loans, registered 188 basis points as of Oct. 16, a drop of about 60 basis points since the beginning of the year. Adding an element of drama and complexity to the overall picture is the inverted yield curve scenario, the point at which the 10-year Treasury bond falls below the level on the two-year bond. That’s precisely what occurred in mid-August, resulting in high volatility on Wall Street. Historically, an inverted yield curve is a strong indicator that the risk of recession is increasing. It means that investors are concerned about the economic outlook in the short term, but it provides no guarantee that …
