Issuance of private label commercial mortgage bonds has practically come to a halt ahead of the Labor Day holiday, but activity is set to pick up in September, when there is in excess of $10 billion of deals on the calendar.
That means that volume for 2014 as a whole could surpass last year's total.
Analysts at Barclays anticipate $10 billion worth of conduit, single-borrower, and floating-rate deals will be issued in September, and that's the low end of the scale. Bank of America Merrill Lynch analysts predict $14 billion to price next month; and JP Morgan puts the figure at $15 billion.
Private label supply stood at $53.6 billion as of Aug. 22, according to a report published by JP Morgan on that date. “Should the full pipeline price next month it will easily set a new post-crisis record for monthly supply, eclipsing the previous record of $10.9 billion in November 2013,” the report states.
The largest uptick in volume is expected to be in floating-rate and single-borrower deals. Conduit issuance is on pace to match the $6 billion plus months in July and March, and the rest, according to a Barclays Aug. 22 report, will be single-borrower deals. The Barclays chart below shows how issuance will be distributed across private label CMBS structures.
And analysts are optimistic that the market will be able to absorb this supply. Barclays said that as long as macro volatility declines and the CMBS market continues to recover from the most recent selloff, investors will have good appetite.
JP Morgan expects that the slow pace of new issuance in late August means investors will have money to put to work next month. “We continue to recommend seasoned 2013 triple-A rated mezzanine tranches and 2014 single-A rated tranches in the conduit space, as fundamentals remain favorable and the market is recovering from the recent tightening,” the report states.