The interest rates on federal government debt securities have seen a significant drop to 3.12% in May, which has in turn raised the value of the commercial mortgage-backed securities held in trust in the U.S. This combined with demand for those performing loans in the secondary market has helped to drive loan prices down for commercial real estate. For more on this continue reading the following article from National Real Estate Investor.
The aggregate value of securitized loans priced by DebtX at the end of April registered 80.9% of par value, up from 79.8% a month earlier and 76.4% a year ago.
“Declining Treasury yields coupled with strong demand for performing loans on the secondary market had a positive impact on commercial real estate loan prices,” says Kingsley Greenland, CEO of Boston-based DebtX, which provides an online marketplace for loan sales.
Indeed, the 10-year Treasury yield declined to 3.32% on April 29, down from a recent peak of 3.75% reached on Feb. 8. By May 24, the 10-year yield had fallen even further to 3.12%.
Because bond yields move inversely to bond prices, the declining 10-year Treasury yield has elevated the value of loans held in CMBS trusts.
In April, DebtX priced 53,271 commercial real estate loans with a $653.2 billion aggregate principal balance. The loans collateralized 627 U.S. CMBS trusts.
This article was republished with permission from National Real Estate Investor.
