Issuance of securities backed by commercial mortgages is in the longest lull in more than 10 years, according to Chris Lau, an analyst at Royal Bank of Scotland Group PLC's RBC Greenwich Capital.
"It's been six weeks since the last new-issue deal," a $1.27 billion offering that Bank of America Corp. priced June 19, he wrote in a note to clients Monday. "The next deal will not be marketed for another month and will mark the longest stretch in between deals in over a decade."
Merrill Lynch announced last week that it would sell $30.6 billion of CDOs to Lone Star Funds at a steep discount. That plan, combined with data showing weakness in the gross domestic product and nonfarm payrolls, "weighed on spreads" in the CMBS market, Lau wrote.
Though only $500 million of commercial mortgage bonds were sold last week, "down considerably from previous two weeks' multiple billions, month-end pressure" on balance sheets "caused dealers to shy away from positioning more inventory," the note said.
At the end of last week fixed-rate commercial mortgage bonds rated triple-B-minus yielded 1.9 percentage points more than the swap rate, or 100 basis points more than the spread a week earlier, according to a chart in Lau's report.