JPMorgan Chase & Co. (JPM) sold about $1 billion of commercial-mortgage bonds after widening the relative yields on some classes, according to people familiar with the transaction.
A top-ranked slice maturing in 9.91 years, initially marketed to yield 110 basis points more than the benchmark swap rate, paid 115 basis over the benchmark, said the people, who declined to be identified because the terms aren’t public. The spread on debt rated A3 by Moody’s Investors Service yields 425 basis points, after being marketed to pay 400 basis points, the people said.
Landlords are borrowing more against their properties in commercial-mortgage bond deals planned through June, according to Moody’s. Transactions slated to be marketed during the second quarter include pools with average loan sizes approaching or exceeding the value of the buildings as calculated by Moody’s, the New York-based ratings company said in a report this week. Banks may have to boost investor protections if underwriting standards keep sliding, it said.
Commercial-mortgage bond sales have been reviving, with banks arranging about $28 billion of the securities last year, up from $11.5 billion in 2010, according to data compiled by Bloomberg. About $5 billion has been sold this year, compared with a record $232.5 billion in 2007.
Relative yields on commercial-mortgage bonds surged earlier this month when the Federal Reserve Bank of New York said it was considering selling portions of its portfolio assumed in the 2008 rescue of American International Group Inc., fueling concerns that a flood of bonds would depress values. The spread has since narrowed to 186 basis points, or 1.86 percentage points, more than Treasuries after reaching a six-week high of 206 basis points on April 10, according to a Barclays index.
The Fed invited eight dealers to bid on the $7.5 billion portion of the portfolio linked to commercial real estate CDOs, the district bank said today in a statement.
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