Commercial-Mortgage Bond Sales May Reach 12-Year Low (Update2)

Sales of chemical bonds backed by commercial
real estate loans may fall to the last degree since at least
1996 as investor demand for the debt slumps.

Commercial-mortgage backed securities offers dropped to
$12.2 billion in the first one-half of the year, from about $137
billion in the same time period of 2007, according to Analysts at the firm, Moody's Investors Service and cut their forecasts. JPMorgan predicts
sales will fall to $20 billion this twelvemonth from the record $237
billion in 2007 and the last since 1996.

The diminution shows the 's seven interest-rate
cuts since September had limited success in reviving the market
for securities derived from existent estate assets after the collapse
of subprime mortgage-related bonds. Sir Joseph Banks and fiscal firms,
reeling from $400 billion in writedowns and recognition losses, are
also less willing to do new loans.

''It's not at all unreasonable to believe that we may be done
for the year, unless something alterations very rapidly,'' said , a senior frailty president at the Washington-based Mortgage
Bankers Association. Wall Street ''is not originating new loans,
and there is no ground to believe it's going to change any time
soon,'' she said.

Spreads Widen

Sales of commercial-mortgage debt backed by U.S.
skyscrapers, shopping promenades and industrial plants, whose monthly
interest payments pay bondholders, plummeted as the collapse of
the subprime marketplace last twelvemonth caused investors to fly all but
the safest authorities assets.

In Europe, 3.6 billion Euroes ($5.63 billion) of the
securities were sold this year, a one-tenth of the 33 billion euros
issued in the same time period a twelvemonth earlier, according to data
compiled by Deutsche Depository Financial Institution AG.

U.S. commercial-mortgage backed debt rated AAA and maturing
in 10 old age outputs 154 footing points more than benchmark swap
rates, compared with 30 footing points a twelvemonth ago, Lehman Brothers
Holdings Inc. information show. A footing point is 0.01 per centum point.

Spreads widened to more than than 300 footing points in March, just
before the backed New York-based 's buy of Bear
Stearns Cos. The higher cost to sell the chemical bonds do it
unprofitable for Wall Street to arise new loans to package
into securities, said , a money director at Dwight
Asset Management in Burlington, Vermont.

''This marketplace is coming back, it's just going to be a little
slower than we had hoped for six calendar months ago,'' Wulf said in a
telephone interview.

Borrowers have got been seeking option word forms of financing
such as little commercial Banks and coverage companies since Wall
Street stopped making new loans, said Jim Duca, a managing
director in the commercial mortgage-backed securities grouping at
Moody's. These other beginnings won't last forever, he said.

Sales Slump

RBS prognoses gross sales may be as low as $15 billion. Moody's
estimates less than $20 billion, down from a prognosis of $100
billion made in late 2007 and $35 billion last month. analysts cut their projection in March to a scope of $25
billion to $40 billion, from $86 billion to $100 billion at the
beginning of the year.

In the most recent deal, Depository Financial Institution of United States Corp. and Barclays
Plc sold $1.29 billion in debt backed by commercial mortgages on
June 19. The biggest AAA part was priced to give 147 basis
points over the benchmark barter rate.

Concern that the U.S. economic system is catching also weighs on
commercial existent estate.

Investment in commercial place drop 70 percentage in the
first one-fourth from a twelvemonth earlier as Banks curtailed recognition and
slower economical growing curbed demand for business office and industrial
space, according to the . There's
a ''strong link'' between tenancy rates and employment, New
York-based Lehman analysts and wrote in a
June 24 report.

'Backing Up The Truck'

Banks aren't as willing to impart money to investors seeking
to purchase the debt, making it harder to hike tax returns using borrowed
cash, , the caput of commercial mortgage-backed
securities research at JPMorgan in New York, said.

''Investors position the human race in a less leveraged framework,
and are demanding higher tax returns on the securities they buy,''
Todd said.

Delinquencies of less than 1 percentage are attracting some
investors. The per centum of commercial mortgages that have
payments 60 years or more than late is 0.46 percent, compared with 0.26
percent a twelvemonth ago, according to information from Trepp LLC, a New York-
based research firm.

''I am a large truster in championship up the motortruck and buying
commercial-mortgage backed securities'' arsenic a weaker dollar draws
foreign place buyers, BlackRock Inc. President
said at a conference on June 24. New York-based BlackRock is the
largest publicly traded monetary fund manager inch the U.S.

Volatility

Swings in spreadings are deterring some investors from buying,
said , a senior managing director of the commercial
lending grouping at PPM United States Inc. in Chicago. The house have got more
than $72 billion in assets under direction in the U.S.

''We have a chicken-and-egg problem,'' Max Born said. '''We need
a steady watercourse of new deals, among other things, to reduce
volatility. But to have got a steady watercourse of new deals, we need
reduced volatility.''

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