Yields on commercial mortgage bonds relative to benchmark rates reached new highs last week.
Spreads on AAA-rated commercial mortgage-backed securities rose 16.8 basis points, to a record 405.1 basis points more than the benchmark swap rate Thursday, according to Bank of America Corp. data. The spread on the securities was 312.3 basis points a week earlier, the data showed.
Kenneth Hackel, head of fixed-income strategy at Royal Bank of Scotland Group PLC's RBS Greenwich Capital Markets, wrote in a note to clients Friday that, if Congress passes the financial rescue bill, it would give a "desperately needed vote of confidence" in credit markets.
Top-rated commercial mortgage-backed securities stand to benefit from an easing of credit concerns, said Mr. Hackel, who recommended buying the bonds. The record high spreads on AAA-rated commercial mortgage securities may overstate the risk of rising defaults in the sector, he said.
"Some of the worst-case fears about commercial real estate have not been realized, and I don't think they will be," Mr. Hackel said Friday in an interview.
Commercial mortgage-backed securities are commonly priced off the swap rate, which was 4.3% on Friday.