Deadlines Loom, Securitization Markets In Gear

The 10 year Treasury yield has settled into a range of about 2.65-2.75% in recent weeks as the “Goldilocks” outlook is in vogue: not too hot, not too cold: the economy is strong with potential headwinds and slowing growth with little inflation. With the shutdown now over (for now), Washington deadlines are in the spotlight: February 15 to pass another funding bill, March 1 to finalize a trade agreement with China (or big tariffs ensue), and very important is the March 1 reinstatement of the debt ceiling. This means that the government will have a few months of financial manipulation before defaulting on US Treasury debt. Now comes word that the debt ceiling extension may be rolled into the government funding talks. CMBS/CLO: Floating rate securitizations are going very well after a post crash record 2018 of issuance, some originators are cutting spreads accordingly. The first 2019 CMBS securitizations are pricing soon, but pricing talk is optimistic, about 5 bps inside of the final 2018 pools. Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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