Liberty SBF’s CMBS Rates and Commentary for Jan. 21, 2014

Those worried that the weak employment report in December will cause the Fed to rethink tapering should put those fears aside, says the Wall Street Journal. Publicly, Fed officials seem to support winding down the bond buying program at its current pace.

Bloomberg recently reported that the Fed “will further trim the stimulus by $10 billion at each policy meeting before ending the program in December, according to a Bloomberg survey of economists taken Jan. 10.”

Everyone is eagerly awaiting next months Non-Farm Payrolls report because the January release was so weak. Was it an aberration or is corporate hiring still weak? The U.S. needs to see 300K new jobs per month in order to move the dial.

Industrial production was up moderately in the Q4 2013. A sample of the numbers includes manufacturing production ending up 0.4% in December and a 2.6% up year-over-year. Auto production gains in November and December up 3.6% and 1.6% respectively.

Housing starts rose 18.3% last year (923K pace), the most since 2007. Estimates show that to keep up with population growth the U.S. needs 1.6 to 1.9 MM new units per year.

Bloomberg News reported  that the Markit CDX North American Investment Grade Index, a credit-default swaps benchmark, rose two weeks in a row after Fed tapering news kicked in. The index is a guage of U.S. corporate credit risk.

There are also reports that fracking in the U.S. has helped to cut into inflation and support treasuries.

Hessam Nadji SVP and chief strategy officer at Marcus & Millichap recently spoke about the CMBS market saying that 2014 is looking good and the turmoil of last year (starting with sequester and ending with a government shutdown) might be over for a while.

“A lot of confidence going into 2014,” he said in a recent interview. “Mainly because there’s more certainty.” 

We think that the CMBS market should remain steady as we head into the new year if we continue to see the 10-year treasury in the 275-315 range. Bloomberg reported 10-Year yields in a range from 2.82 to 2.84% on Tuesday morning.

CMBS Rates 01/20/2014
3.91% I 5 YEAR FIXED
5.34% I 10 YEAR FIXED