Index / ETFs — June 28, 2022

Term spread effects on the International Real Estate Index

Term spreads have risen in multiple regions around the globe, as long-term sovereign yields soared amid rising (expected and actual) inflation but central banks took longer to raise short-term interest rates. The impact of this on international real estate has mostly been positive over the past two-and-a-half years. More precisely, the iSTOXX® Developed and Emerging Markets ex USA PK VN Index (the “Int’l Real Estate Index”) was positively impacted by the overall upward trend in term spreads in the US, the UK, Japan (JP) and Europe (EU) between 2019 and 2022.

This study is a follow-up to the one undertaken in the paper entitled “The International Real Estate Index — A hedge against expected inflation.” It examines the effects that term spread moves have had on the index since its inception, and how the index may be impacted by future changes in term spreads.

Author

Diana R. Baechle, PhD

Director, Applied Research

Christoph Schon, CFA, CIPM

Senior Principal, Applied Research