Capital Markets Update Week of 9/18

September 18, 2023

Private-Label CMBS and CRE CLOs

  • Only one transaction priced last week, a $679 million conduit backed primarily by 10-year loans (BBCMS 2023-C21).
  • Year-to-date, the private-label CMBS and CRE CLO issuance stood at $28.6 billion, 69% behind last year’s tally at this time of $92.5 billion.

Active Pipeline Over Next Two Months

  • Two transactions are currently in the market, including one conduit and one CRE CLO.
  • In addition, Commercial Mortgage Alert reports that the issuance pipeline will be flush over the next couple of months with multiple conduit and SASB offerings.

CMBS Spreads Steady

  • Benchmark CMBS spreads in the secondary market were unchanged across the capital stack last week. LCF AAA, AA, and A spreads remained at 138, 250, and 410, respectively, while BBB- spreads stayed at 915.
  • AAA SASB spreads were tighter by 2 bps, in a range of 145 – 217.

Benchmark Rates Remain Elevated

  • The 10-year Treasury yield was up 7 bps last week to 4.33%. The 10-year yield hit a YTD high of 4.34% on August 21, the highest since 2007.
  • CME 1M Term SOFR was unchanged last week at 5.33%, its highest level of 2023, and up 97 bps since the beginning of the year.
  • Inflation data released last week raised fears of a reacceleration in prices. Annual inflation accelerated to 3.7% in August, following a jump in energy prices. While core inflation registered its lowest annualized level in almost two years, it still recorded a larger-than-expected monthly gain of 0.3%. “We expect the committee to continue shifting to a message of ‘higher for longer,’” said Oscar Munoz, Chief US Macro Strategist at TD Securities. “… Fed officials aren’t likely to fully close the door to additional rate increases.”
  • Traders are pricing in a 98% chance that the Federal Reserve will keep its benchmark interest rate steady in September and an approximately 30% chance that it will raise the interest rate one more time by the end of the year, according to CME’s FedWatch Tool. In addition, they are pricing in a 36% likelihood that the central bank will keep the policy rate at its current range of 5.25% to 5.5% until June next year.

Agency CMBS

  • Agency issuance totaled $1.8 billion last week, consisting of $1.2 billion in various Freddie transactions and $600 million in Fannie DUS. For the year, agency issuance stands at $79.4 billion, 28% lower than the $110.3 billion for the same period last year.


Raj Aidasani
Senior Director, Research

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