|
| Capital Markets Briefing |
| August 18, 2009 |
Good Morning,
Attached is a PDF copy of Colliers Meredith & Grew's interest rate sheet that includes current and historical Treasury, LIBOR and Prime interest rates, which are updated daily with real time data from Strategic Alliance Mortgage.
We provide these updates on a weekly basis to keep our clients and colleagues aware of rate movements. We hope you find this information helpful.
DOWNLOAD INTEREST RATE SHEET (22KB)
Capital Markets Briefing
- Have you noticed the parallels between the banking sector and the Boston Red Sox starting pitching rotation as of late? Two words: Disabled List. While a majority of local/regional banks and credit unions continue to originate new loans in volume, the number of firms being put on the DL is growing. The loan/deposit ratio (which is, crudely, the amount of a bank’s loans divided by the amount of its deposits at any given time) is the most often cited metric keeping banks on the sidelines. In a majority of cases, inactivity is neither related to capital issues nor loan performance issues. Many banks are working on getting more deposits with a select few exploring buying another bank/thrift with deposits as a quick fix.
- As published in New England Real Estate Journal's Spotlight/Mid-Year Review, we noted that “spreads on whole mortgages have not risen in lockstep with the steepening yield curve...(which) suggests that lenders have been pricing to absolute returns.”
We are seeing evidence that life insurance companies with sizeable allocations for the 3rd and 4th quarters are tightening their pricing–resulting in lower effective spreads on whole mortgages–in order to raise the odds that they will win transactions fitting within their current parameters for new originations. For life companies which typically benchmark absolute return requirements to peer equivalent corporate bond yields, a marked decrease in benchmark spreads at the end of June has allowed for moderate re-pricing of commercial real estate debt origination. The yield on single ‘A’ corporates were sub-6% at 10:05 a.m. in New York, according to Strategic Alliance Mortgage (SAM). Triple ‘B’ yields also edged lower before settling at sub-7%.
With benchmark corporate yields tightening, interest rates on whole mortgages–in theory–should trend lower. It is important to note, however, that due to the higher costs associated with new mortgage origination vs. simply buying a corporate bond the spread premium for new loans may tighten but not in lockstep with corporates. Spreads on whole mortgages reflect the illiquidity of mortgages, higher reserve requirements, capacity issues (size of real estate assets in proportion to overall investment portfolios and relative to peers). Despite these factors, as corporate ‘A’ and ‘BBB’ yields creep below the 6% and 7% thresholds, respectively, bond equivalent pricing up in the 8% range is now less supportable. Factors that will now affect life company pricing include allocation levels, willingness to go long (10-30 year terms) at current coupons, and which portfolio lenders see competitive advantage in pricing inside the competitive set in order to preserve and expand relationships.
Debt/Capital Markets Articles of Note
Bond Expert Tuesday Outlook: Put Me in the ‘W’ Camp
Seeking Alpha—August 18, 2009
Prices of Treasury coupon securities have retreated in overnight trading as better than expected economic data has buoyed European stock markets and fueled a rise in US markets in pre-market trading.
Investors’ fears are eased on TALF
Financial Times—August 17, 2009
The Federal Reserve and the US Treasury on Monday extended a $200bn programme designed to revive the securitisation market, bringing relief to investors concerned that the supply of cheap government financing was set to end.
Government’s Shifting Housing Policy: Is Owning Out?
Seeking Alpha—August 17, 2009
Is President Obama’s administration going to use the Great Recession to amend the subsidy for home ownership that came out of President Roosevelt’s Great Depression programs? If an article in the Boston Globe is on target, then the answer may be, at least partially, yes.
President shifts focus to renting, not owning
The Boston Globe — August 16, 2009
The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society” and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.
|
| Please contact the Capital Markets Group at Colliers Meredith & Grew with any financing questions.
|
|
|
|
|
|
Colliers Meredith & Grew respects your privacy. If you prefer to be removed from our distribution list, please click here to unsubscribe. A copy of our privacy policy can be found on our website.
Colliers Meredith & Grew is a Boston-based commercial real estate company with integrated service groups including Brokerage, Capital Markets, Counseling & Valuation, Development & Advisory, Investment Sales, and Property & Asset Management. In addition to representing its core clients in New England, Colliers Meredith & Grew provides national and international real estate services to its multi-market clients as a member of Colliers International and as an owner/member of Strategic Alliance Mortgage LLC (SAM). Colliers International is a worldwide affiliation of independently owned and operated companies in more than 293 offices in 61 countries. |
|
