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Thursday, 17 January 2019

DBRS: Exploring the Impacts of Rising Interest Rates on the CMBS Market

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We recently asked each of the CMBS rating agencies to outline what their biggest concerns might be in the event interest rates increase over the coming year. We're publishing their responses, which also appear in our Year-End magazine. For an electronic version of the magazine, please email orest.mandzy@crenews.com.

By Edward Dittmer and Erin Stafford

In 2019, DBRS expects the increasing 10-year Treasury rate to push issuance of CMBS slightly lower and flatten the growth of commercial real estate values. The CMBS market already faces issuance headwinds as the downturn in lending from 2009 to 2010 reduced current refinancing demand.

As the cost of funds for property investors increases, we can expect investors to reduce their return expectations, which may also dampen acquisition financing. Investors that seek higher returns may increasingly consider floating-rate, transitional financing that can accommodate more business plan risk and higher leverage.

However, DBRS does not see a sharp reduction in volume from 2018 levels. The change of control in Congress may lead to gridlock in Washington, reducing the likelihood of additional fiscal stimulus. Additionally, forecasters are signaling an economic slowdown that would likely contribute to lower inflationary pressure and less upward stress on long-term interest rates than expected.

Still, the 10-year Treasury yield has risen more than 50...


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“The Weekly”

“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

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Additional Info

  • Syndicate to Realpoint: No
  • Subject: Commercial MBS (CMBS), Mortgages/Financing (MOR), Research (RES)
  • Private: Yes
Read 297 times Last modified on Thursday, 17 January 2019
Dan Moynihan

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