Commercial Mortgage-Backed Securities Delinquencies Break 10%

Trepp’s 30+-day delinquency rate increased 24 basis points in May, ending the month at 10.4 percent, a whopping 50 basis points higher than year-end 2011.

While the CMBS world is not going to collapse, both underwriters of the securities and investors therein are going to see this (combined with the never ending Euro-crises) as a signal to shift toward a more conservative  position. And, regardless of where benchmark U.S. Treasury bonds trade, spreads are going to widen as lenders hit their lending floors.

As the Trepp LLC weekly and Cushman & Wakefield Sonnenblick-Goldman monthly surveys (below) show, spreads have widened 20+ basis points over the past month, partially to accommodate perceived increases in risk and partially to absorb the incredible decline in Treasury yields.

Monday’s Numbers

The Trepp LLC survey was unchanged over the survey period.

Asking Spreads over U.S. Treasury Bonds in Basis Points

(10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value Ratios)

12/31/09

12/31/10

12/31/11

6/25/12

Month Earlier

Office

342

214

210

224

205

Retail

326

207

207

218

198

Multifamily

318

188

198

210

186

Industrial

333

201

205

212

190

 

 

 

 

 

Average Spread

330

203

205

216

195

 

 

 

 

 

10-Year Treasury

3.83%

3.29%

1.88%

1.72%

1.95%

The Cushman & Wakefield Sonnenblick-Goldman Commercial Mortgage Spread survey showed spreads for 10-year fixed rate mortgages widening 20 to 25 basis points during the survey period.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

12/31/10

2/28/12

3/28/12

4/27/12

5/30/12

Multifamily – Non-Agency

+270

+240

+230

+240

+250

Multifamily – Agency

+280

+210

+195

+200

+210

Regional Mall

+280

+300

+275

+275

+300

Grocery Anchored

+280

+290

+270

+270

+295

Strip and Power Centers

 

+315

+295

+295

+320

Multi-Tenant Industrial

+270

+310

+310

+285

+305

CBD Office

+280

+310

+295

+270

+295

Suburban Office

+300

+320

+310

+290

+315

Full-Service Hotel

+320

+350

+350

+340

+360

Limited-Service Hotel

+400

+360

+360

+350

+370

5-Year Treasury

2.60%

0.78%

0.83%

0.83%

0.69%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 10 Year Commercial Real Estate Mortgages

12/31/10

2/28/12

3/28/12

4/27/12

5/30/12

Multifamily – Non-Agency

+190

+210

+200

+210

+220

Multifamily – Agency

+200

+180

+165

+170

+190

Regional Mall

+175

+235

+275

+220

+245

Grocery Anchor

+190

+230

+270

+200

+230

Strip and Power Centers

 

+250

+290

+235

+260

Multi-Tenant Industrial

+190

+250

+280

+240

+260

CBD Office

+180

+320

+270

+220

+250

Suburban Office

+190

+250

+290

+245

+270

Full-Service Hotel

+290

+290

+325

+260

+295

Limited-Service Hotel

+330

+315

+345

+290

+320

10-Year Treasury

3.47%

1.90%

2.21%

1.95%

1.62%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Floating-Rate Commercial Mortgage

Spreads For 3 – 5 Commercial Real Estate Year Mortgages

12/31/10

2/28/12

3/28/12

4/27/12

5/30/12

Multifamily – Non-Agency

+250-300

+200-250

+200-250

+200-250

+200-250

Multifamily- Agency

+300

+220-265

+220-265

+220-265

+220-265

Regional Mall

+275-300

+200-265

+200-265

+200-265

+210-275

Grocery Anchored

+275-300

+200-275

+200-275

+200-275

+205-275

Strip and Power Centers

 

+225-300

+225-300

+225-300

+225-300

Multi-Tenant Industrial

+250-350

+225-305

+225-305

+225-305

+235-305

CBD Office

+225-300

+225-300

+225-300

+225-300

+225-300

Suburban Office

+250-350

+250-325

+250-325

+250-325

+250-325

Full-Service Hotel

+300-450

+275-400

+275-400

+250-400

+275-400

Limited-Service Hotel

+450-600

+350-550

+325-450

+325-450

+325-450

1-Month LIBOR

0.26%

0.24%

0.24%

0.24%

0.24%

3-Month LIBOR

0.30%

0.49%

0.47%

0.47%

0.47%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA (1): -0.81%
S & P 500 (2): +1.63%
NASDAQ (3): +5.46%
Russell 2000 (4):-0.47%
Morgan Stanley U.S. REIT (5):+4.64%
_____
 (1) Dow Jones Industrial Average. (2) Standard & Poor’s 500 Stock Index. (3) NASD Composite Index. (4) Small Capitalization segment of U.S. equity universe. (5) Morgan Stanley REIT Index.

U.S. Treasury Yields

12/31/10

12/31/11

6/2/2012

3-Month

0.12%

0.01%

0.07%

6-Month

0.18%

0.06%

0.11%

2 Year

0.59%

0.24%

0.25%

5 Year

2.01%

0.83%

0.62%

7 Year

 

 

0.93%

10 Year

3.29%

1.88%

1.45%

                                                  

Key Rates (in Percentages)

 

Current

1 Mo. Prior

3 Mo. Prior

6 Mo. Prior

1 Yr. Prior

Fed Funds Rate

0.17

0.16

0.12

0.08

.011

Federal Reserve Target Rate

0.25

0.25

0.25

0.25

0.25

Prime Rate

3.25

3.25

3.25

3.25

3.25

US Unemployment Rate

8.20

8.10

8.30

8.70

9.00

1-Month Libor

0.24

0.24

0.24

0.27

0.19

3-Month Libor

0.47

0.47

0.48

0.53

0.25