Today’s Fed meeting statement indicated less concern about global headwinds risks, but no hurry to raise rates. This follows Fed Chair Yellen’s dovish speech last month. This allows the Fed to “watch the data” until the June meeting, when the next “dot plot” mapping out of future rate hikes is due. The 10 year treasury rallied, the yield dropped to 1.85% after peaking at 1.96% yesterday. This follows a familiar pattern of recent years: bond yields rise globally indicating a more bullish sentiment for growth, inflation, etc; only to once again fall as confidence ebbs. Consensus is two more hikes in 2016. CMBS: Bond spreads continue to contract on supply/demand dynamics as originators and their B-Piece buyers tighten up on underwriting standards. Consequently, servicers are receiving more extension and workout requests for maturing CMBS loans originated in the “heyday” of 2006, where the existing borrowers are unable to refinance. Lenders are originating full leverage (about 8.5% debt yield) as low as T + 2.50%, putting all-in rates around 4.50%–for good transactions. Stay Tuned. David R. Pascale, Jr.
