The 10-year swap rate and 10-year Treasury rate have dropped gradually since May. This is despite an economic rebound that would suggest higher interest rates as the world recovers from the COVID-19 pandemic. The Federal Reserve, however, indicates it will be “highly accommodative for many years” regarding monetary policy, which is suppressing increases in rates.
At the same time, strong demand on newly issued CMBS securities is resulting in tight pricing. Recent CMBS issues have priced in the range of 65-70 basis points (bp) over 10-year swaps and spreads on the triple-B-minus tranche priced in the range of 260-300 bp. These levels are well inside other pandemic-era pricing and among the tightest since the global financial crisis.
As a result, interest rates on CMBS conduit loans are near record lows. Loan spreads in Term Sheets have decreased to 200-250 bp depending on loan size and leverage, and adding the current 10-year swap of 1.25% results in rates of 3.25%-3.75%. It’s time to lock in these rates while they are available. For current CMBS conduit loan spreads and interest rates, click here. For a free, no-obligation CMBS conduit loan quote, please contact Michael Sneden (firstname.lastname@example.org) or Gary Unkel (email@example.com).