U.S. commercial mortgage-backed bond yields soar

November 14, 2008 by · Leave a Comment
Filed under: Real Estate News 

No surprise that now we are waking up to the fact that we are facing a serious recession, the commercial real estate market is finally starting to lag, prices are declining and risks on the bonds are rising.  This in turn, means investors are demanding higher returns if they are going to invest in any Commercial Mortgage Back Securities (CMBS).  According to Reuters, some bonds are being quoted at a huge 12% yield.


Yield premiums on bonds backed by office buildings, stores and hotels soared to record highs this week as concerns about economic growth and doused hopes for a federal asset purchase program plagued the market.

Traders quoted spreads on some commercial mortgage-backed securities more than 8 percentage points over key benchmarks, pushing yields above 12 percent. Spreads on top-rated CMBS last week reached 6.35 points, according to JPMorgan Chase & Co.


Risk premiums extended increases as U.S. Treasury Secretary Henry Paulson on Wednesday said a $700 billion rescue plan would be geared toward providing banks with equity, rather than using it as a fund to take illiquid mortgage assets off bank balance sheets. Banks laden with even highly rated securities have also had to sell as they reduce debt.

Full Source: Reuters


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