The quick read: Commercial mortgage rates rose more than the Fed's 25 basis point hike because most fixed-rate commercial loans are priced off Treasury yields, and the bond market moved further than the Fed did. The Federal Open Market Committee raised the federal funds target range by 1/4 percentage point to 3-3/4 to 4 percent on September 16, 2026. Treasury's daily par yield curve shows the 10-year yield at 4.70% on August 3 and 5.31% on October 5, a 61 basis point climb, before it eased to 5.12% on October 20. The minutes of the September meeting say changes in real rates drove most of the increase in longer-maturity yields, and market commentary pointed to higher term premiums. Floating-rate loans tied to SOFR or prime moved by roughly the size of the hike. Market data here run through October 20, 2026; on October 28, 2026, the Committee held the target range at 3-3/4 to 4 percent.
What does the Fed's rate control, and what does it leave to the bond market?
The Fed's policy rate controls the overnight cost of money, because the FOMC sets a target range for the federal funds rate and overnight benchmarks such as SOFR and prime follow it. A 10-year Treasury yield is set by investors, who price the expected path of that rate over a decade plus a term premium.
The September statement, released at 2:00 p.m. EDT on September 16, 2026, says the Committee "decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent," by a 12-0 vote. The implementation note issued the same day raised the rate paid on reserve balances and the primary credit rate, both effective the next day:
Fed funds target range before the meeting (FOMC statement, July 29, 2026): 3-1/2 to 3-3/4 percent
Fed funds target range after the meeting (FOMC statement, September 16, 2026): 3-3/4 to 4 percent
Interest on reserve balances (Board of Governors, effective September 17, 2026): 3.90 percent
Primary credit rate (Board of Governors, effective September 17, 2026): 4.0 percent
That is the whole of what the Fed did between August 3 and October 20: one quarter-point move. The FOMC's 2026 calendar lists only the September 15-16 meeting in that window.
Commercial Observer described the split in a September 28, 2026 report: the federal funds rate is closely tied to short-term loans, floating-rate debt and construction financings, while the 10-year Treasury yield sets the borrowing costs for many commercial real estate loans. A fixed-rate quote therefore reflects what the bond market expects the Fed to do across the loan term, and what investors charge for holding that risk, rather than the single move made at one meeting.
What pushed the 10-year Treasury yield up by more than the Fed's hike?
The 10-year Treasury yield rose more than the hike because investors priced a higher path for policy and demanded a higher real return for holding long bonds. Treasury's real yield curve shows the 10-year real yield up 52 basis points from August 3 to October 5, 2026, against a 61 basis point rise in the nominal 10-year yield.
The minutes of the September 15-16 meeting, released October 7, 2026, describe the period between the July and September meetings. The minutes' review of financial markets reports: "Nominal yields increased around 35 basis points across the 2- to 10-year segment of the yield curve." Part of that reflected the higher expected path of monetary policy and strong economic data. Market commentary, the minutes say, pointed to geopolitical developments, uncertainty about the Treasury's buyback program and heavy private debt issuance to finance artificial intelligence infrastructure as contributing to higher term premiums. The staff review adds that changes in real rates contributed to most of the net increase in longer-maturity Treasury yields, while inflation compensation accounted for most of the rise in shorter maturities.
Treasury's own data line up with that account. The par yield curve shows the 10-year at 4.67% on July 29 and 5.00% on September 15, a 33 basis point rise (our arithmetic). After the hike, the climb continued:
10-year Treasury yield, August 3, 2026 (Treasury par yield curve): 4.70%
10-year Treasury yield, September 16, 2026, the day of the hike (Treasury par yield curve): 5.01%
10-year Treasury yield, September 23, 2026 (Treasury par yield curve): 5.11%
10-year Treasury yield, October 5, 2026 (Treasury par yield curve): 5.31%
10-year Treasury yield, October 20, 2026 (Treasury par yield curve): 5.12%
10-year real yield, August 3, 2026 (Treasury real yield curve): 2.43%
10-year real yield, October 5, 2026 (Treasury real yield curve): 2.95%
10-year real yield, October 20, 2026 (Treasury real yield curve): 2.77%
Subtracting the real yield from the nominal yield gives the inflation compensation investors demanded. It was 2.27 percentage points on August 3, 2.36 on October 5 and 2.35 on October 20, so about 52 of the 61 basis points in the climb to the October 5 peak came from real yields (all our arithmetic). Commercial Observer reported on September 28 that the 10-year and 30-year yields reached their highest levels in 19 years on September 23. For a borrower, the point is simple: the index under a fixed-rate quote rose because of real rates and term premiums, and the Fed's quarter point explains only part of it.
Which commercial loans follow SOFR or prime, and which follow Treasuries?
Floating-rate commercial loans follow SOFR, SBA 7(a) variable loans follow prime, and fixed-rate permanent loans lock against a Treasury yield that matches the term. That is why the same hike raised floating coupons by about a quarter point while fixed quotes moved with the bond market, by more than the Fed's 25 basis points.
| Benchmark (source) | Loans that commonly price off it | Aug 3, 2026 | Sep 16, 2026 | Latest | Move since Aug 3 | Move since Sep 16 |
|---|---|---|---|---|---|---|
| Benchmark (source) Fed funds target range (FOMC) | Loans that commonly price off it Anchor for overnight rates | Aug 3, 2026 3.50% to 3.75% | Sep 16, 2026 3.50% to 3.75% | Latest 3.75% to 4.00% | Move since Aug 3 +25 bp | Move since Sep 16 +25 bp |
| Benchmark (source) SOFR (OFR data) | Loans that commonly price off it Floating-rate loans, including agency ARMs on 30-Day Average SOFR | Aug 3, 2026 3.65% | Sep 16, 2026 3.62% | Latest 3.88% | Move since Aug 3 +23 bp | Move since Sep 16 +26 bp |
| Benchmark (source) Prime rate (H.15 weekly average) | Loans that commonly price off it SBA 7(a) variable loans and other prime-based loans | Aug 3, 2026 6.75% | Sep 16, 2026 6.75% | Latest 7.00% | Move since Aug 3 +25 bp | Move since Sep 16 +25 bp |
| Benchmark (source) 5-year Treasury (par yield curve) | Loans that commonly price off it Five-year fixed-rate loans | Aug 3, 2026 4.40% | Sep 16, 2026 4.86% | Latest 4.94% | Move since Aug 3 +54 bp | Move since Sep 16 +8 bp |
| Benchmark (source) 10-year Treasury (par yield curve) | Loans that commonly price off it Ten-year fixed-rate permanent loans | Aug 3, 2026 4.70% | Sep 16, 2026 5.01% | Latest 5.12% | Move since Aug 3 +42 bp | Move since Sep 16 +11 bp |
| Benchmark (source) 10-year real yield (real yield curve) | Loans that commonly price off it The inflation-adjusted part of the 10-year | Aug 3, 2026 2.43% | Sep 16, 2026 2.68% | Latest 2.77% | Move since Aug 3 +34 bp | Move since Sep 16 +9 bp |
Latest means October 20, 2026 for SOFR and Treasury yields; the fed funds range shown is the one the Committee held on October 28, 2026. The prime figures are the Fed's H.15 weekly averages for the weeks ending August 5, September 16 and October 14, 2026. The higher fed funds range took effect September 17. Moves are our arithmetic.
SOFR loans. Daily SOFR, as published in the Office of Financial Research's data, was 3.62% on September 16 and 3.85% on September 17, the day the new range took effect. Fannie Mae's Multifamily Guide, effective September 28, 2026, indexes its structured ARM loan to 30-Day Average SOFR, defined as a compounded average of SOFR over a 30-day interest period, with an interest rate equal to the index plus the guaranty fee, servicing fee and investor spread, adjusting every month. A 30-day average absorbs a one-day jump over roughly a month.
Prime loans. The SBA says maximum rates on 7(a) loans are pegged to the prime rate or an optional peg rate; for a variable loan above $350,000 the cap is the base rate plus 3.0%. With prime as the base rate, that cap was 9.75% at a 6.75% prime and is 10.00% at a 7.00% prime (our arithmetic). The cap moved exactly with the hike.
Treasury loans. The same Fannie Mae Guide defines an index as the basis for an ARM loan's note rate or for entering a Streamlined Treasury Lock on a fixed rate mortgage loan. Fixed-rate quotes on five- and ten-year terms rose with those Treasury yields, which is the gap this article's title asks about. For the wider 2026 rate picture, see our 2026 guide to commercial real estate loan rates and our look at whether higher rates are slowing commercial real estate lending.
How much did the move change the payment and proceeds on a $5 million loan?
On an illustrative $5 million loan, the bond-market move cost a fixed-rate borrower more than the hike cost a floating-rate borrower. Holding an assumed 2.00% spread over the 10-year constant, the rate rises from 6.70% to 7.12% between August 3 and October 20, 2026, and annual debt service on a 30-year amortization climbs by about $16,900.
The spreads below are our assumptions, chosen to isolate the index; they are not market quotes, and actual spreads vary by lender, property and leverage.
Fixed loan (illustrative): $5,000,000, 30-year amortization, 10-year Treasury plus an assumed 2.00%
Rate on the August 3 index: 6.70%, annual debt service about $387,200
Rate on the October 20 index: 7.12%, annual debt service about $404,000
Rate on the October 5 peak: 7.31%, annual debt service about $411,800
Proceeds at a 1.25x coverage test on the same net operating income: about $5.00 million in August, $4.79 million on the October 20 index, $4.70 million at the October 5 peak
Floating loan (illustrative): $5,000,000 interest-only, SOFR plus an assumed 3.00%
Rate on August 3 SOFR: 6.65%, annual interest $332,500
Rate on October 20 SOFR: 6.88%, annual interest $344,000
The fixed borrower lost roughly $209,000 of proceeds at the October 20 index and about $299,000 at the peak, because a debt service coverage test divides the same income by a larger payment. The floating borrower's annual interest rose $11,500, almost exactly the hike. Lender spreads can also move, and quotes taken over the same window show whether they did; this example holds them fixed so the index effect is visible. Check today's benchmarks on our rates page before you rerun it.
What does the Fed's own outlook mean for waiting on a rate cut?
Waiting for a cut is a bet against the Committee's own stated outlook, because the September 15-16 minutes, released October 7, 2026, say most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end. Even a cut lowers a fixed quote only if Treasury yields follow it.
The minutes also say participants approach each meeting with an open mind and that decisions at future meetings would depend on incoming information and its implications for the outlook and the balance of risks. The Committee held the target range at 3-3/4 to 4 percent on October 28, 2026, by a 10-2 vote; Lisa D. Cook and Beth M. Hammack voted against, preferring to raise it by 1/4 percentage point. The next scheduled meeting is December 8-9, 2026.
Two practical points follow from the data rather than from any forecast:
- Fixed-rate borrowers are exposed to the bond market while they wait. The 10-year moved from 4.94% on September 17 to 5.31% on October 5, a 37 basis point range in under three weeks (our arithmetic). A wait can cost or save more than a Fed move.
- Floating-rate borrowers are exposed to the policy rate. SOFR rose with the hike within a day. If the Committee acts again, a floating coupon follows on its next reset.
Our lock vs. wait rate calculator compares the known cost of locking today against the expected cost of waiting, using your own rate scenarios and the odds you assign to each, plus the carry premium you pay in the meantime. Run it with a scenario where yields rise, not only one where they fall.
How do you get a commercial mortgage placed while Treasury yields are moving?
You get a commercial mortgage placed in a moving rate market by sending one complete package to several lender types at the same time, so every fixed quote is struck against the same Treasury print and every floating quote against the same SOFR level, and then negotiating spread, lock timing and prepayment terms together.
1. A commercial mortgage brokerage. YieldStack, which publishes this article, recommends this route first. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. Its software matches the deal against 20,000+ loan programs and compares fixed and floating structures side by side; human brokers then structure the request, negotiate spread and lock terms on the borrower's side and carry the deal toward closing. The median first offer arrives in under an hour, from an institutional lender, which matters when the 10-year moved 37 basis points in under three weeks. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
2. Your existing bank or credit union. A relationship lender can be quick on a prime- or SOFR-based loan, but you see one spread, one lock policy and one set of prepayment terms.
3. A single direct lender or agency originator. You see the programs that one lender offers, priced on the day it chooses to quote.
What to send so the quotes are comparable:
- Rent roll and trailing-12-month operating statement
- Your current loan's rate, index, maturity date and prepayment terms
- Target loan amount, fixed or floating preference and the term you need
- Purchase contract or payoff statement
- Your timing constraints: closing date, rate cap expiry or maturity date
When the package is ready, send the deal for review.
The bottom line
The Fed moved its target range a quarter point on September 16, 2026, and floating-rate loans on SOFR or prime moved about that much. Fixed-rate loans follow Treasuries, and the 10-year rose 61 basis points from August 3 to its October 5 peak, mostly through real yields. Price fixed and floating options against the same day's benchmarks before you decide whether to lock.