Big lenders are set to unload up to $5 billion in commercial mortgage bonds, with planned securities offerings scheduled in September and October. Participating financial institutions include ""Goldman Sachs Group Inc."":http://www2.goldmansachs.com/, ""Citigroup Inc."":http://www.citigroup.com/citi/homepage/, ""Bank of America Corp."":http://promo.bankofamerica.com/multiproduct/index2.html?testtarget=1&cm_mmc=EBZ-EnterpriseBrand-_-Google-PS-_-bank%20of%20america%20corp-_-Corporation, ""Morgan Stanley"":http://www.morganstanley.com/, ""Wells Fargo & Co."":https://www.wellsfargo.com/, ""Royal Bank of Scotland Group Plc"":http://www.rbs.com/home.ashx, and ""JPMorgan Chase & Co."":http://www.jpmorganchase.com/corporate/Home/home.htm[IMAGE]
The upcoming bond sales are largely attributed to the effects of struggling U.S. employment numbers, the European debt crisis, and the resistance against debt as relative yields rose to the highest peak since early 2009.
The bond offerings will not be subject to grades from ""Standard & Poor's"":http://www.standardandpoors.com/home/en/us, continuing the controversy that S & P started when in July when it refused to rate billions in bonds put on the market by Goldman and Citigroup.
Fall's planned bond liquidation should bring the total number of 2011 sales to an estimated $25 billion, according to ""Barclays Capital"":http://group.barclays.com/Home commercial-mortgage debt analyst, Julia Tcherkassova, who spoke to the _Wall Street Journal_ regarding the future selloff.[COLUMN_BREAK]
Tcherkassova continued her commentary, noting the buyer demand for additional yield when structuring top-ranked commercial-mortgage debt deals, and she referenced a Barclays Plc Index that indicated a basis-point increase of 2.95 percentage points between July and August, representing a 69 basis point rise for a total of 295.
Tcherkassova also indicated that the spread stood at 298 basis points as of August 8, showing the widest level since July 2010.
As of September, Goldman and Citigroup will make a second attempt to sell an estimated $1.5 billion in bonds following July's failed sale due to problems with S&P, and company insiders claim the total offering may increase in size, in statements made to the _Journal_.
BAC, Morgan Stanley, Wells Fargo, Royal Bank, and JPMorgan are also planning to execute a collective bond sale; the companies are rumored to have been working for several months to pool loans for the upcoming deal.
The current sell off rate is well below original 2011 predictions, and both BAC and JPMorgan have adjusted issuance estimates for the year. Initial yearly forecasts for both institutions stood at around $40 billion, but now, BAC is predicting only $25 to $30 billion in bond sales, while JPMorgan remains a bit more optimistic with its projection of $30 to $35 billion to end the year.
When asked if Barclays planned to alter its 2011 outlook, Tcherkassova told the _Journal_, ""We are not revising yet because we still hope to see more deals in November and December.""