Low Rates Help Commercial Mortgage Securities Market Rebound in 2003

Issuance of commercial mortgage-backed securities for 2003 could touch $72 billion, according to Moody's Investors Service, making 2003 the second or third highest year ever for domestic CMBS issuance.

Speaking at a Moody's CMBS conference, Jim Duca, a Moody's managing director and CMBS analyst, noted that as of the third quarter, issuance had touched $57 billion and there is also about $15 billion in the pipeline.

Moody's is seeing more fusion transactions (in which a large deal is included in a CMBS pool) this year, with 65% of Moody's-rated CMBS deals year-to-date falling in this category, compared to 57% of such deals for the whole of 2002.

These deals are becoming more common in the post-9-11 market, according to Mr. Duca.

Another factor that has aided CMBS issuance this year is the historically low interest rate environment.

This is likely to cause some refinance risk going forward, to the extent that interest rates rise, especially for floating rate mortgage loans of the "2003 vintage," he believes.

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