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Federal Reserve Likely to Begin Balance Sheet Reductions

Steady economic performance and the tightened labor market have encouraged the Fed to begin normalizing its balance sheet. Since starting quantitative easing in 2008, the Fed has amassed $4.5 trillion in mortgages, bonds and other assets.

In a move likely to put upward pressure on long-term interest rates, the Fed will begin winding down its portfolio, according to Marcus & Millichap’s Midyear 2017 Federal Reserve Spotlight report, which notes the Fed will engage this process cautiously over a prolonged period.

Key report findings include:

-The Fed balance sheet reduction will place upward pressure on long-term interest rates, which have been range-bound in recent months. Foreign investment in U.S. Treasuries could partially offset this movement.
-The Fed will closely monitor the yield spread between long- and short-term rates.
-CRE yields still offer a premium over the Treasury rates, but the spread could tighten as interest rates rise.
-Investor caution remains elevated, moderating transaction activity, but the flow of capital to the sector is still elevated by historical standards.

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.