Three real estate ETFs gain as the Federal Reserve cuts rates, steepening the yield curve and lifting mortgage REIT margins.
The Federal Reserve has reduced its target rate three times since September 2025, lowering the upper bound to 3.75% as of July 28, 2026. The cuts have steepened the yield curve, with the 10-year Treasury holding near 4.65%, widening net interest margins for mortgage REITs.
Real estate ETFs have responded, with Vanguard Real Estate ETF (VNQ) posting 16% year-to-date gains and Hoya Capital High Dividend Yield ETF (RIET) offering a 10.5% yield. The iShares Mortgage Real Estate ETF (REM) focuses on leveraged mortgage REITs, benefiting most from the yield curve shift. Existing home sales remain soft at 4.09 million annualized, leaving room for further easing.
The 10-year Treasury yield has risen about 25 basis points over the past month, nearing its 12-month high and reinforcing the steepening trend.