Congress May Fail on Stimulus But Avoid Shutdown, CMBS Update

It looks like Congress will keep the government open with a “clean” continuing resolution punting any shutdown risk until the December “lame duck” session after the election. The bill may be so clean that it won’t include any updated stimulus funding. A vastly stripped down bill in the Senate has little chance of becoming law and serious negotiations have yet to start. Last week’s employment report was positive on the surface with the headline jobless rate falling to 8.4% from 10.2% in July. But the jobs survey is conducted during the week that includes the 12th of the month. During late August some warning signs emerged as job openings plunged on major job recruiter sites. Major employers are set to implement job cuts in September/October (such as airlines and other travel industry employers if the aforementioned stimulus is not approved). Fed Chair Powell spoke in an interview soon after the report was released and reiterated that low interest rates will be in place for “an extended period of time, measured in years”. CMBS spreads continue to tighten as the bond buyers bid aggressively on loans originated in the “2020 normal.” Well underwritten office, industrial, multifamily and self storage loans are pricing in the 3.50% range with some interest only as the 10 year T remains at about 0.70%. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners