428. Pressure Beneath the Profits: Bank Earnings, Hot Inflation, Falling Yields, & $2.9B in Hurricane-Exposed CRE

Haley Keene (0:06)

Welcome to The TreppWire Podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending October 16th, 2026

I'm Haley Keene with Trepp, a data modeling and analytics firm for the CMBS, commercial real estate and CLO markets. I'm with Lonnie Hendry, Chief Product Officer, and Stephen Bushbumb, Head of Applied Research and Analytics.

We have a busy week to unpack, starting with the September inflation report, headline CPI accelerated to 3.7 percent, core inflation also moved higher, and treasury yields rose as investors reassessed the possibility of another Fed rate hike later this month. Energy remains a major contributor, but the price pressures extend beyond gasoline. Today, we will also be digging into earnings from the largest banks, where continued loan growth and resilient consumer activity are sharing the spotlight with higher funding costs and uneven results in trading and investment banking. In our property news and credit stories, we will look at how those financing conditions translate into acquisition strategies, underwriting assumptions, and loan performance. And for this week's Digging Through the Data, we'll examine approximately $2.9 billion in securitized CRE debt exposure across the Florida counties included in FEMA's Hurricane Isaias Emergency Declaration. Stephen, we have a lot to cover this week. Let's look across the week's headlines and tell us what stands out to you first.

Stephen Bushbumb (1:38)

Well, let me start off by saying, this has been anything but an uneventful week. In other words, this surprised me and put my head on a swivel. What stands out is how much of the outcome depends on the financial flexibility behind the headline numbers.

I would say that is a common through theme for everything, even the stuff that wasn't on my bingo cart this week. So the banks are still reporting substantial earnings and their customers are continuing to borrow and spend. The higher deposit costs and slower activity in parts of the capital markets show where rising costs are creating friction.

Wednesday's inflation report adds uncertainty about how much longer those pressures could persist. In addition, we got an extremely hot PPI print on Thursday as well.

Month over month increases were almost double than what was expected. The year over year number was almost a point higher. So between CPI and PPI, inflation pressures are very evident and are going to put a lot of pressure on the Fed. That's going to make their upcoming meeting really interesting to watch. You're seeing strong division and views out there between what the Fed should or should not do around midterm elections. In other words, if they hike on this next meeting, that can be perceived as political. Then again, if they don't hike, it could be seen as political. So get one of those, well, darned if you do, darned if you don't. So now getting back to the property story here, we have some interesting ones this week. The Chrysler Building buyers are planning an acquisition redevelopment without leverage. Really interesting. At the assembly, in San Jose, the financing economics depend heavily on underwritten income materializing. And a larger hotel portfolio is entering special servicing despite reported cash flow that still covers debt service. So really interesting property stories this week. And then the hurricane analysis we went through as well adds another dimension. Properties can face immediate repair and operating expense pressures, while insurance claims take time to resolve. Across all of these stories, we'll be looking at the cash flow available today.

I mean, we've gotten so many great shout outs on LinkedIn. I love it. I love the image of the gap, right? The chasm between cash flow today and what the lender wants and how that gap gets closed. Just bring more equity. Fantastic. I love that. So the obligations are coming due and the resources owners have to manage that gap matter so much. But I would say what ended up being the dominant story this week, Lani, has to be this massive rally on the long end and treasures. I mean, shoot, last week, we were touching 5.35.

I'm glad we did that pivot point analysis for resistant point because we didn't break through that. It showed that kind of technical analysis can have some value over a short horizon. What's really crazy to me is that we've rallied 15, 20 basis points from that and even on the heels of a hot PPI print on Thursday morning. Before that PPI print, the 10-year had already rallied 10 to 11 basis points. PPI came out hot. The 10-year looked like maybe it was going to retreat and was only down nine basis points, but then it went back to down 12 basis points. In other words, the risk version trade from really, what the main story Thursday morning was, was CoreWeave, the concern about their corporate debt selling off and what kind of weakness exists in the tech part of the economy. How much should we be worried about the AI trade? How resilient is it really? It's becoming a much more important story on the macro front, which I think a lot of people are waiting for it. So there's this snap reaction.