Commercial-mortgage bonds lead improving debt markets
Commercial-mortgage bonds are outperforming investment-grade company debt and Fannie Mae corporate notes this month, all among the top debt categories rewarding investors who bought or held on to devalued securities, Bloomberg reported.
Top-rated commercial-mortgage bonds, which returned 32 percentage points less than Treasuries in October and November, have offered a record 12 percentage points more than government notes through Dec. 24, Barclays Capital index data show.
Debt markets are improving amid hopes that prices fell enough to account for potential defaults and as the U.S. government continues efforts to thaw credit and curb a yearlong recession. One of the AAA classes of a $7.6 billion 2007 Goldman Sachs Group Inc. commercial-mortgage-bond deal, considered a market benchmark, has jumped 24 percent, according to Ken Hackel, head of fixed-income strategy at RBS Greenwich Capital Markets.
"Glad we held on," Hackel, who is based in Greenwich, Connecticut, wrote today in a note to clients.
Hackel had suggested on Oct. 3 that investors buy more commercial-mortgage bonds, after lawmakers passed a $700 billion financial rescue package. Confidence in mortgage-bond markets was subsequently pummeled as the plan's focus shifted from buying troubled assets to pumping capital into banks.
Last month, some commercial-mortgage bonds fell to prices so low that all the loans could default and a buyer wouldn't lose money, according to Lisa Pendergast, an analyst at RBS Greenwich. This month, the Federal Reserve reiterated that its new $200 billion lending program for buyers of asset-backed bonds may be expanded to include the securities.