Mortgage-Bond Selloff Threatens Commercial Property Rebound
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The nascent recovery in U.S. commercial real estate may be cut short as Europe’s debt crisis and Standard & Poor’s credit downgrade of Treasuries send borrowing costs to their highest in more than a year.
The outlook darkened in the past month amid a selloff in securities linked to debt on properties such as office buildings and retail outlets. Top-ranked commercial mortgage-backed securities yielded about 298 basis points, or 2.98 percentage points, more than Treasuries as of yesterday, according to a Barclays Plc index. The yield was last that high in July 2010. The spread jumped 35 basis points last week and is up 89 basis points since the end of the second quarter.