CREFC Capital Markets Update Week of 1/30
January 30, 2023
Issuance Picks Up; Spread Tightening Continues
- Private-Label CMBS and CRE CLOs. The first private-label transactions of the year priced last week, consisting of one conduit and one CRE CLO totaling $1.4 billion. Issuance trails the previous year’s tally for the same period by $4.5 billion. Forward activity is picking up with a near-term pipeline that includes two conduits, two CRE CLOs, and one SASB. In addition, Commercial Mortgage Alert reports that issuers are considering bringing some transactions postponed late last year to market.
- The 10-year Treasury yield ended the week 2 bps higher at 3.50%, while CME 1M Term SOFR was up 4 bps on the week to 4.56%. The 10-year Treasury is 170 basis points higher on a year-over-year basis, while CME 1M Term SOFR is 451 basis points higher. Elevated rates were the story of 2022, with financing costs becoming prohibitive for many borrowers, and, combined with continued market volatility, deal collateral became harder to aggregate for issuers.
- Spreads on 10-year on-the-run conduit bonds continued to tighten at lower levels, with AA – A down 20 – 25 bps to 220 – 350 and BBB- down 15 bps to 695. Super-senior AAA bonds were unchanged at 112. Senior AAA CRE CLO spreads tightened 20 bps on the week, ending at 210.
- Agency CMBS. Agency issuance was also active last week, totaling $2.3 billion. Primary drivers included a $920 million Freddie K transaction, $450 million of Fannie DUS, and $550 million of Ginnie PLs. Agency issuance for 2023 now stands at $5.8 billion, well behind the $16.0 billion for the same period last year. The GSEs ended 2022 falling short of their $78 billion lending cap. In addition to higher rates and reduced acquisition activity, the agencies faced stiff competition from banks, debt funds, and life companies over the past year.
Contact Raj Aidasani (raidasani@crefc.org) for more information