Monday's Numbers and Noteworthy News
Recent Headline Stories from “Real Estate Investment SmartBrief”, a daily publication of the National Association of Real Estate Investment Trusts:
Economists dial back recession rhetoric
An increasing number of economists have started tempering their talk about a recession in the U.S., citing improvements in the stock and credit markets, policy responses and better-than-anticipated economic reports. "A couple months ago it seemed like we were on the abyss," said Jay Bryson, a global economist with Wachovia. "Things have changed. ...The numbers we've seen recently haven't been as bad as we were led to believe just a few months ago." Numerous warning signs remain, however.
Bernanke cautions that credit crisis isn't over
The credit crisis is not over and it "is likely to take some time" before financial markets return to normal, Federal Reserve Chairman Ben Bernanke said. His comments Tuesday led stocks to rise, bonds to sell off sharply, and rate futures markets to start pricing in prospects for higher interest rates by year-end. His comments highlighted the Fed's efforts to keep the U.S. economy out of a deep slump. Meanwhile, speeches by other Fed officials noted the fear that rising energy prices would stoke inflation.
"What a difference a year makes"
| May 16, 2008 | One Year Ago | Change | |
| Prime Rate | 5.00% | 8.25% | -3.25% |
| Federal Funds Rate | 2.00% | 5.25% | -3.25% |
| 3-Month LIBOR | 2.70% | 5.36% | -2.66% |
| 3-month Treasury | 1.89% | 4.87% | -2.98% |
| 10-year Treasury | 3.85% | 4.86% | -1.01% |
| 30-year Treasury | 4.58% | 5.00% | -0.43% |
Monday’s Numbers
Year-to-Date Equity Market Performance:
DJIA(1): -2.10%
S & P 500(2): -2.95%
NASDAQ(3): -4.65%
Russell 2000(4): -3.26%
MSCI U.S. REIT(5): 9.42%
(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: (as of May 17, 2008)
3-month: 1.84%
6-month: 1.90%
2-Year: 2.45%
5-Year: 3.11%
10-Year: 3.85%
Pricing of Various Tranches of Commercial Mortgage-Backed Securities (as of March 12, 2008)
Rating; Term; Spread to U.S. Treasury Bonds
AAA; 5 years; +248 basis points
AAA; 10 years; +220 basis points
AA; 10 years; +637 basis points
A; 10 years; +837 basis points
BBB; 10 years; +1487 basis points
BBB-; 10 years; +1787 basis points
BB; 10 years; +2300 basis points
B; 10 years; +2700 basis points
Source: Various Investment Banking firms such as Lehman Brothers, JP Morgan, and Morgan Stanley
Indicated Spreads for Conventional Commercial Mortgages (as of April 30, 2008)
According to the most recent survey of indicated spreads for conventional commercial mortgage loans by Cushman & Wakefield Sonnenblick Goldman, spreads remained generally unchanged with a modest amount (25 basis points) of widening here and there. However, overall cost to borrowers spiked in the most recent survey due to the widening in spreads of 5-year Treasury bonds (+46 basis points in two weeks) and 10-year Treasury bonds (26 basis points in two weeks).
| Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages | ||
| Property Type | <65% LTV | >65% LTV |
| Multifamily | +230 - 260 | +250 - 300 |
| Regional Malls | +225 | +250 - 350 |
| Strip/Power Centers | +250 - 300 | +300 - 450 |
| Multi-Tenant Industrial | +250 - 300 | +300 - 500 |
| CBD Office | +225 - 325 | +325 - 450 |
| Suburban Office | +250 - 350 | +350 - 500 |
| Full-Service Hotel | +300 - 400 | +350 - 500 |
| Limited-Service Hotel | +300 - 450 | +400 - 500 |
| 5-Year Treasury -- 3.14%; 10-Year Treasury -- 3.86% | ||
| Source: Cushman & Wakefield Sonnenblick-Goldman, LLC. | ||
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There is so much mis-information in the media, these days. I wanted to thank you for your article. Your reporting provided true value-add to the Blog-o-Sphere. Although I did not agree with everything your article stated, on the whole it was an informative read. KUDOS!
Posted by: Shamun Mahmud | May 22, 2008 at 02:29 PM