Markets breathed a sigh of relief as Greece and its creditors came to an agreement and other international market concerns abated (not that everything is “solved”). The focus is back on domestic data. Today’s positive housing reports really helped make the case for Fed tightening, but Apple’s earnings report dampened some optimism. Continuing declines in commodity prices are dampening any expectations of inflation. Shorter term treasury yields are rising (they are more sensitive to potential Fed moves as the Fed rate is a short term rate) while longer term treasury yields are dropping (as they are more sensitive to inflation). The yield curve is as flat as it has been in months. CMBS: The recent market calming has rallied CMBS, but the narrowing of spreads takes longer than the widening, especially as summer wears on and more and more bond buyers are on break. Recent pools (last week and this week) have priced with 10 year AAA’s in the low 100’s with a tough pool pricing near 110. This summer is seeing a huge amount of supply (about $16 billion in July/August), and the market is still not back to April/May levels and may not fully stabilize until after Labor Day. That being said, new 10 year loans are pricing anywhere from 200-240 (the wide range reflects the market choppiness) over SWAPs, so all in coupons around 4.75%. …stay tuned… David R. Pascale, Jr.
