Fixed wins on long-hold strategies needing rate certainty. Floating wins on shorter holds (under 5 years) and on value-add or stabilization plans. An inverted curve means floating is more expensive than fixed today. An upward-sloping curve means floating is cheaper today. A flat curve means they cost about the same today.
What does the yield curve tell you?
An inverted curve means short rates are above long rates, so floating is more expensive than fixed today. The forwards imply short rates will fall. An upward-sloping curve means floating is cheaper today, and the higher fixed coupon is the premium paid to remove rate risk. A flat curve means they cost about the same today.
What about hedging?
Floating-rate loans usually require interest-rate caps that compensate for some of the rate risk. Caps are not free, they cost 0.5 to 3.0 percent of loan amount in 2026. Compare floating-plus-cap to fixed on an apples-to-apples basis before deciding; sometimes the cap cost erases the floating-rate advantage.
Sources
- Daily Treasury Par Yield Curve Rates · U.S. Department of the Treasury · daily
- Secured Overnight Financing Rate (SOFR) · Federal Reserve Bank of New York · daily