price-the-cap-rate-spread

name	price-the-cap-rate-spread
description	Frame a cap rate as a risk premium over the 10-yr Treasury, not an absolute level, so a 'compression' is read correctly. Reach for this whenever a cap rate enters a memo.

Skill: Price the cap-rate-vs-Treasury spread

A cap rate alone hides whether you're being paid for risk. This frames it as a spread and puts the historical percentile in the memo.

Step 1 — Compute the spread

Cap rate minus the current 10-yr Treasury yield — the risk premium you're actually buying (§3 #3).

Step 2 — Place it historically

Compare the spread to its long-run range; a thin spread (e.g. ~172 bps, 24th percentile in Q3 2025) means little risk compensation.

Step 3 — Decompose a move

When the cap rate moves, attribute it to the rate leg vs the premium leg — they have opposite implications.

Step 4 — Carry the date

Every cap-rate and Treasury figure gets a retrieval date; these move quarterly (§3 #8).

Output

A spread, its historical percentile, an attribution of any move, and the dated sources.