Spreads on commercial mortgage backed securities have moved wider over the past two weeks, in line with corporate credit markets, on relatively light volume.
Spreads on benchmark legacy A4s are 12 basis points wider at swaps plus 165 basis points, while 10-year new issue triple-As have sold off 5 basis points to swaps plus 100 basis points, according to research published Friday by J.P. Morgan.
August has turned out to be one of the busiest months for conduit supply post-crisis, with five deals totaling $5.4 billion pricing. That is second only to April, when $5.6 billion priced. For the year-to-date through Aug. 23, issuance of private-label CMBS has reached $53.7 billion.
Nevertheless, analysts at J.P. Morgan we continue to believe that higher borrower rates will begin to impact volume in the fourth quarter; they are maintaining their forecast for issuance of $70 billion for the year as a whole.
“Given the relatively short warehousing period for CMBS loan originations, higher rates are already visible in recent conduit transactions,” the analysts said a weekly report. They noted that weighted average net collateral for conduit deals that priced in August is approximately 4.62%, up nearly 60 basis points from deals issued in June.
The report said investor focus has begun to shift back towards potential Fed policy action at their upcoming meeting in mid-September; J.P. Morgan maintain its ‘neutral’ recommendation on CMBS.