Monday Market Moves | Treasury Up, SOFR Down: Why Borrowers Are Seeing Two Different Lending Markets
Welcome to Monday Market Moves, the weekly series from Essex Capital Markets covering trends in Chicago commercial real estate financing, multifamily debt, and capital markets strategy.
Many commercial real estate borrowers assume that rates move in one direction.
In reality, borrowers today are operating in two different lending markets.
Fixed-rate loans are largely driven by Treasury yields, while floating-rate loans are tied to SOFR. Over the past year, those benchmarks have moved in different directions, creating different opportunities and challenges depending on how a loan is structured.
Quick Takeaway
Borrowers evaluating acquisitions, refinances, or bridge loans should focus not only on where rates are today, but also on which benchmark is driving their financing. The answer can significantly impact pricing, proceeds, and overall loan structure.
What Is the Difference Between Treasury Rates and SOFR?
Treasury Bonds (Typically 3,5,7, and 10 Year maturities) serves as the primary benchmark for many fixed-rate commercial real estate loans, including agency financing and long-term bank debt.
SOFR, or the Secured Overnight Financing Rate, serves as the benchmark for many floating-rate and bridge loans.
While both influence borrowing costs, they do not always move together.
Understanding which benchmark applies to your loan is critical when evaluating financing options.
Why Are Borrowers Seeing Two Different Lending Markets?
Fixed-Rate Borrowers Are Still Feeling Treasury Pressure
Though not by high historical standards, treasury yields remain elevated compared to the levels many borrowers became accustomed to during the previous cycle.For example, today (6/22/2026) the 10-year treasury yield is 4.49%. One year ago it was 4.38%, in September of 2024 it was 3.73%. The past 5 year average is 3.37%. skewed by abnormally low rates in 2021 and 2022. The long-term average for the 10-year treasury is 5.81% .
For borrowers pursuing long-term fixed-rate financing, Treasury movement continues to play a significant role in determining overall loan pricing.
This means:
- Higher all-in borrowing costs
- Potential pressure on refinance proceeds
- Greater focus on loan structure and amortization
- More emphasis on execution and lender selection
Floating-Rate Borrowers Have Benefited From Lower SOFR
SOFR has moved lower from recent highs, helping improve borrowing costs for some floating-rate borrowers. For example, today (6/22/2026) the 30-day average SOFR was 3.61%. One year ago it was 4.36%.
This has created opportunities for:
- Bridge financing
- Transitional assets
- Value-add business plans
- Short-term acquisition financing
As a result, some borrowers are experiencing lower debt costs even while Treasury yields remain elevated.
What Does This Mean for Chicago CRE Borrowers?
The key takeaway is that there is no single answer to the question, “Where are rates?”
The answer depends on several factors, including:
- Whether the loan is fixed or floating
- The business plan for the property
- The expected hold period
- The borrower’s risk tolerance
- Future refinancing objectives
A borrower pursuing a bridge loan may experience a very different lending environment than a borrower pursuing a 10-year fixed-rate refinance.
What Are We Seeing in Today’s Market?
At Essex Capital Markets, we are seeing borrowers spend more time evaluating loan structure than they did several years ago.
The conversation is increasingly shifting from:
“What is the rate?”
to
“What is the right structure for the business plan?”
For many borrowers, that question is proving to be far more important than simply chasing the lowest available rate.
As lenders continue to offer a variety of fixed-rate and floating-rate options, borrowers who understand how these benchmarks impact their financing decisions are often better positioned to execute their investment strategy.
Key Takeaways
- Treasury yields and SOFR are moving differently, creating two distinct lending environments
- Fixed-rate borrowers remain heavily influenced by Treasury movement
- Floating-rate borrowers have benefited from lower SOFR levels
- Loan structure has become increasingly important in financing decisions
- The best financing option depends on the borrower’s business plan and investment strategy
Conclusion
While many market participants continue to focus on the direction of interest rates, today’s lending environment is more nuanced than a simple rate discussion.
Treasury yields and SOFR are influencing borrowers in different ways, creating two distinct financing markets depending on loan structure.
For Chicago commercial real estate borrowers evaluating acquisitions, refinances, or bridge financing, understanding which benchmark is driving the loan may be just as important as understanding where rates are headed next.