Perm priced over the swap curve (bank perm, some life-co ) becomes more expensive in absolute terms when swap spreads widen. Treasury-priced perm (most life-co, some agency) is unaffected and becomes relatively cheaper. A 25 bps widening can shift bank-perm-vs-life-co relative value enough to flip the optimal lender choice.
Why swap spreads matter to perm-loan selection
Different lender categories price over different reference curves. Bank perm typically prices over the swap curve (5-year swap, 7-year swap, 10-year swap depending on loan term). Life-co perm typically prices over the Treasury curve (5-year, 7-year, 10-year Treasury). Agency multifamily prices over Treasury. CMBS prices over swap or Treasury depending on the program and the conduit.
Swap spread is the difference between the swap rate and the matching-tenor Treasury rate. When swap spreads widen (swap rises faster than Treasury), bank perm pricing widens in absolute terms; life-co Treasury-priced perm pricing is unaffected.
Selection adjustment: the placement firm's bake-off should always include both Treasury-priced and swap-priced lenders so that swap-spread movement during the 7-to-14-day quoting window can be observed. A bake-off that quotes only swap-priced lenders at a moment of widening swap spreads delivers a worse outcome than the same bake-off would have produced with broader lender mix.
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