Two years ago at the NIC Fall Conference, the spike in interest rates, with the 10-Year Treasury rate heading above 3.5%, seemed to spook many investors, as deals started disintegrating left and right. That did not help to lift the mood of everyone there. Then, last year, on the eve of NIC, rates were again spiking, this time above 4.5% and heading to 5.0%. The Fed may have stopped its rate increases, but the costs of borrowing were not on the decline. At least there was a belief that the worst had passed, or at least we were in the middle of the worst. Again, did not lift the spirit of the thousands of NIC attendees, and thank you for the open bars.
Now, we are approaching another NIC Fall Conference, and it is a totally different story. The 10-Year Treasury dipped below 3.65% yesterday, for the first time in more than a year, and we are nearing the lowest yields in more than two years. The Fed is primed to lower rates by at least 25 basis points next week, and maybe by 50 basis given the weaknesses in job creation, the consistent downward revisions of said job creation, and other weak market indicators. Lower rates mean more buyers can afford to make acquisitions, pay higher prices and potentially lure more sellers to market with those higher prices. With M&A at a record pace right now, we imagine DC will be a hive of transaction activity and celebratory dinners in a couple of weeks. We will be watching.
