The SOFR -Treasury basis is the spread between SOFR (or SOFR forwards) and the matching-tenor Treasury yield . It varies day-to-day based on funding-market conditions and demand for repo financing. Widening basis makes SOFR-priced bridge loans relatively more expensive vs. Treasury-priced perm; tightening basis does the reverse.
How basis affects the bridge-vs-perm calculation
SOFR is a secured overnight rate based on Treasury repo transactions. The 1-day SOFR is roughly equivalent to a 1-day risk-free rate. Forward-looking SOFR (term SOFR) is constructed from SOFR futures and OIS swap markets and represents market expectations for compounded SOFR over a defined term.
The basis between SOFR (or term SOFR) and the matching-tenor Treasury reflects funding-market conditions. In calm markets, term SOFR trades close to the matching Treasury yield. In stressed markets (year-end balance-sheet pressure, dealer-funding stress, repo-rate spikes), SOFR can trade meaningfully above Treasury.
Practical CRE impact: bridge loans priced over SOFR see their effective rate move with the SOFR-Treasury basis. When the basis widens, SOFR-priced bridge becomes relatively expensive vs. Treasury-priced perm. The cap-priced bridge structure (SOFR plus spread plus cap premium) compounds the basis effect because cap pricing also responds to SOFR forward levels.
Sponsor planning: monitor the SOFR-Treasury basis when running parallel bridge and perm bake-offs. The basis can shift the relative-value answer week-to-week even if the underlying loan terms are unchanged.
Source notes
- published daily by the Federal Reserve Bank of New York for SOFR, and by the Treasury for daily yields
Sources
- Secured Overnight Financing Rate (SOFR) · Federal Reserve Bank of New York · daily
- Treasury Constant Maturity Series (DGS5, DGS10) · Federal Reserve Bank of St. Louis (FRED) · weekly
- Daily Treasury Par Yield Curve Rates · U.S. Department of the Treasury · daily