CREFC Capital Markets Update Week of 3/20

March 20, 2023

Banking Sector Troubles Spread to CMBS       

  • Private-Label CMBS and CRE CLOs. Widening trouble in the regional banking sector rippled into the CMBS market, pushing spreads wider and causing issuers to pull planned deals. Year-to-date private-label CMBS and CRE CLO issuance stood at $6.2 billion, well behind last year’s tally at this time of $43.8 billion.
  • According to Commercial Mortgage Alert, several transactions were teed up, including a $1 billion conduit offering backed entirely by five-year loans, but then delayed when markets failed to calm down. The freeze may continue this week as the market awaits clarity on the future path of interest rates when the FOMC meets on March 21 – 22.
  • Treasury yields fell on the week as banking worries spurred haven buying and sidelined the idea that the Fed could continue its aggressive rate increases. As of Friday, Fed Funds futures showed a 38% chance that the central bank would hold rates steady at its next meeting – compared to 0% the week prior – with 62% expecting a 25 basis point hike. The 10-year Treasury yield ended the week down 27 bps at 3.43%. CME 1M Term SOFR was down 10 bps on the week to 4.76%.
  • Benchmark CMBS spreads were sharply wider across the curve and all subsectors, driven by risk-off sentiment in the broader markets. LCF AAA conduit bond spreads ended the week wider by 28 bps to 160, with AA – A spreads up 40 – 45 bps to 275 – 425 and BBB- spreads up 75 bps to 950. SASB AAA spreads were up 40 – 50 bps on the week to 185 – 275, while CRE CLO AAA spreads were up 45 to 235.
  •  Agency CMBS. Agency issuance totaled $1.8 billion, consisting of $1.3 billion of Fannie DUS and $520 million of Freddie Multi-PCs. Freddie postponed a fixed-rate K-Deal due to market conditions. Agency issuance for 2023 now stands at $20.0 billion, 52% lower than the $41.9 billion for the same period last year.


Raj Aidasani
Senior Director, Research

The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.

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