CMBS Rates and Market Commentary – FOMC Meeting and the 10-Year Treasury

March 20, 2014

Amid fear over Russia’s intervention in Ukraine, 10-year Treasury yields fell on Tuesday, down to 2.67% even though President Vladimir Putin said that he wasn’t planning to send more troops into the region. Experts said the bond was still trading within range and that “violence would have to escalate for Treasurys to move significantly higher.”

The Federal Open Market Committee held its first meeting led by Janet Yellen.

“The mix of economic data hasn’t given the Fed much room to diverge from its current path,” said Alex Cohen, Liberty SBF CEO. “We fully expect the Fed to stay the course on both rates and bond-purchase reduction to $55-billion per month. The phrasing of forward guidance seems as important as anything else coming out of this meeting.”

After that meeting, Yellen’s conference moved markets. The new Chairwoman’s response to questions about when the Feds expect to move rates was a little too transparent.

“You know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing,” she was quoted as saying in Bloomberg. The news website said that the timeframe was “a bit quicker than markets had been expecting, so interest rates rose and stocks fell.”

The comment “sent equity markets into something of a tailspin,” wrote Paul Ashworth of Capital Economics. The 10-year treasury opened at 2.78% on Thursday.

Unemployment rose to 6.7% in February and in the past the Fed has said that it will keep rates low well past the time when that rate drops below 6.5%.

Recent indicators include the National Association of Home Builders Index for March, which came in at 47 but less than an expected 50, although it was up from 46. Weather and a shortage of lots is what builders say is impacting the market.

The Fed reported that “Industrial production increased 0.6% in February after having declined 0.2% in January. In February, manufacturing output rose 0.8% and nearly reversed its decline of 0.9% in January, which resulted, in part, from extreme weather.” Capacity utilization for total industry increased in February to 78.8% and factory capacity rose to 76.4 from 75.9.

Weather seems to have a continued impact on business.

GlobeStreet reported that “Trepp LLC has stated the late-pay rate for securitized commercial mortgage loans at 6.78% for February, a 47-bps drop and the ninth consecutive month this rate has declined. It marked the first time the delinuency rate had fallen below 7% since February 2010. Among Fitch-rated CMBS, the delinquency rate fell 46 bps to 5.43%, its lowest level in five-and-a-half years.”

Commercial Mortgage-Backed Security Loans (CMBS) Weekly Rate Sheet 3/20/2014
Non-Recourse loans for Limited Service Hotels, Office, Industrial, Retail, Multifamily. (As low as $3 Million)

Current Rates
4.64% I 5 YEAR FIXED
5.29% I 10 YEAR FIXED

Term
5-10 year term
25-30 year amortization

Loan Parameters
• Up to 65% LTV on hospitality transactions.
• Up to 70% LTV on conventional commercial real estate acquisitions and refinances.
• DSCR > 1.45x

Call (888) 996-0194 for more info or email CMBS@LibertySBF.com.