March 15 (Bloomberg) -- Commercial mortgage-backed bond returns are accelerating as the Federal Reserve ends support for the $700 billion market, showing growing confidence that loan defaults won’t derail the economic recovery.
The securities, derived from debt on skyscrapers, shopping malls and hotels, returned 7.41 percent through March 12, compared with 2.55 percent in the fourth quarter, according to a Barclays Capital index. Top-rated securities are yielding about 3.03 percentage points more than Treasuries, the lowest spread since August 2008, according to Morgan Stanley data.
Commercial mortgage-backed securities are rallying as the Fed’s Term Asset-Backed Securities Loan Facility to buy older debt draws to a close. The jobless rate is holding at 9.7 percent, indicating employment may be stabilizing.
Commercial Mortgage Debt Rallies as TALF Ending: Credit Markets - Bloomberg.com
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