Nov. 2 (Bloomberg) -- Yields on bonds backed by hotel, shopping-center and skyscraper loans rose relative to benchmarks amid concern that a U.S. program to spur lending may see a slowdown in demand after Federal Reserve rejected five securities, according to Barclays Capital.

The gap, or spread, on top-ranked commercial-mortgage backed securities increased 0.15 percentage point to 6.10 percentage points more than benchmark swap rates for the week ended Oct. 29, Barclays data show.

Investors pulled away from commercial mortgage-backed securities after the Federal Reserve said last week that it threw out five bonds that were pledged as collateral for taxpayer loans to purchase the debt. The rejections came as a surprise, and may limit future demand under the program, according to Barclays analysts led by Aaron Bryson in New York.

“The Fed/collateral monitor is more concerned with credit risk than many expected,” the analysts wrote. “TALF investors need to carry out additional credit work before submitting bonds.”

The Fed opened its Term Asset-Backed Securities Loan Facility, or TALF, to so-called legacy commercial-mortgage bonds in July as part of its effort to cleanse bank balance sheets and encourage new lending. The TALF attracts buyers with Fed loans to boost returns. Bonds deemed too risky are rejected by the Fed.

In September, all bonds submitted for purchase with TALF loans were accepted, while October’s rejection rate was the highest since the program started. Loan applications are submitted once a month.

“There does not appear to be one trigger that is used for the determination of acceptable collateral,” Bank of America analysts wrote in an Oct. 28 report.

The Fed may be limiting its exposure to deals from which bonds have been accepted in previous rounds, the Bank of America analysts led by Roger Lehman in New York.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

Last Updated: November 2, 2009 13:11 EST