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BB&T Corporation Message Board

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  • nobankersplease nobankersplease Sep 28, 2011 5:34 PM Flag

    Kelly King on CNBC!

    Investors always want more yield. The issue with CMBS pricing right now is not the yields or collateral value, but the ratings from S&P. That's why GS pulled their deal last month. We can say that higher spreads will be good for the banks, which is true, but its not good if there are no net transactions. The GS deal in August was going to be great for the market...big issuer with very tight spreads and low loan rates, and the investors were there ready to buy it. That deal was going to set the market for the next few quarters and drive up loan demand, spur the economy, etc. etc. But now the market is frozen again. S&P is now doing what they should have done five years ago, but just as they missed the boat then, now they are going too far in the other direction, trying to salvage their reputations.

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    • My understanding is that investors are goosey with the tail end of the capital structure of cmbs as a result of the "soft patch". Your s&p comment is news to me but it is certainly not surpriseing given the excellence of that organization.

      Imo, bbt ought to buy some AAA rated cmbs especially with raising commercial property values in many parts of the country. The yield is 3.8%, about 4 times what bbt is earning on their mbs gse stuff. Also, I think the cmbs stuff is much less risky than mbs gse.

      JPM did sell their cmbs but it took much longer than normal and they probably had to cut prices some to induce investors. CMBS volume in the 3rd qtr is projected at about $10 billion, much stronger than the first half. But the 4th qtr. cmbs business looks weak.

      Are you sure GS pulled their cmbs or did they let some of it go. They should have had no problem moving the upper capital tranches at good prices.

      • 1 Reply to normlasky
      • Norm, if commercial property values are rising as you say, why dont they lend into the recovery? They are a bank you know. BB&T is going nowhere as long as they are just clipping coupons in their securities portfolio. You are evidencing the broader problem with our US financial institutions. They have cash (that we taxpayers gave them) and they have become fixed income portfolio managers instead of lenders.

        Think of it tis way, if all the cash banks are now holding in reserve were invested in sub 4% AAA CMBS, guess what? Yields would come down to nothing, driving down ALL mortgage rates across all issuers, so lending will be even more sharpely reduced. Buying hundreds billions of existing CMBS paper will simply make new lending less attractive for the banks and we will never get out of this ditch.

 
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