Capital Markets Update Week of 11/20

November 20, 2023

Private-Label CMBS and CRE CLOs

  • Only one transaction priced last week, a $721.3 million conduit (BBCMS 2023-5C23) backed by a mix of property types, led by multifamily (34.3%), office (17.9%), and hotel (16.8%).
  • Two SASB hotel transactions are in the market:

- THPT 2023-THL. $794 million offering backed by a 3-year fixed-rate loan on a portfolio of select-service and extended-stay hotels

- SCG 2023-NASH. $240 million offering backed by a 5-year floating-rate loan on two high-end hotels in Nashville, TN

  • Year-to-date, private-label CMBS and CRE CLO issuance totals $38.9 billion, 60% behind the $97.4 billion for same-period 2022.

CMBS Spreads Tighten

  • CMBS spreads tightened in response to a cooler inflation report and hopes the Federal Reserve could be done raising interest rates.
  • Conduit AAA spreads came in 4 bps to +151, while AA-, A-, and BBB- spreads were unchanged at +278, +470, and +965, respectively.
  • SASB AAA spreads were tighter by 2 bps to a range of +156 - +230, depending on property type.
  • AAA and BBB- CRE CLO spreads were wider by 5 bps to +200 and +600, respectively.

Agency CMBS

  • Agency issuance totaled $2.3 billion last week: $1.8 billion in Freddie K transactions and $527 million in Ginnie PLs.
  • Agency issuance stands at $104.3 billion. This is 30% lower than the $149 billion for the YTD period through November 2022 and much improved compared to non-agency CMBS issuance declines of 60%.

The Economy, the Fed, and Rates…

  • Last week’s inflation numbers painted a better-than-expected picture, with the core rate falling to a two-year low of 4% in October. Treasury yields tumbled following the news, with the 2-year ending the week lower by 18 bps to 4.89% and the 10-year lower by 22 bps to 4.44%.
  • Thoughts on the Federal Reserve’s Next Moves. The soft inflation data convinced investors the Fed will not raise interest rates in December. Futures markets just two weeks ago had expectations of a one-third chance of a higher rate by year-end. Now, futures data indicate a 100% chance the Fed will keep rates unchanged in December.
  • Market expectations are building that the Fed will cut rates quickly once it gets going, with the first cut coming as soon as June. However, some aren’t convinced, including Marc Giannoni, Chief US Economist at Barclays:
“Our sense is that the 1990s is actually a pretty good template for what [the Fed] might do. They may move up and down a little bit as they reassess how restrictive their stance of policy is. If the economy weakens, but inflation stalls at, let’s say, 3% or above. I don’t think [the Fed] is going to be able to ease monetary policy.”


Raj Aidasani
Managing 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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