Last week’s positive jobs report followed a disappointing GDP report. Today’s weak productivity report continues a long trend of declining productivity that began in 2004 (after technology fueled productivity efficiencies peaked). This trend seems to be entrenched and ties in with the weak business investment component of GDP. This long decline in productivity is another sign of “secular stagnation” and could keep central bank rates low for a long time. Today’s auction of 10 year treasuries netted 1.50% coupons; one of the lowest yielding auctions ever. The next big clue to the Fed’s intentions is Fed Chair Yellen’s scheduled comments at Jackson Hole later this month. CMBS spreads remain tight as a risk retention compliant pool securitized very well last week, but was uncharacteristically packed with solid low leveraged collateral. There is a lot of competition among originators for “good properties in good markets with good sponsors”. As for the “other deals”; uncertainty remains. Stay tuned.
