Jan. 24 (Bloomberg) -- Goldman Sachs Group Inc. and Citigroup Inc. sold $1 billion of commercial-mortgage bonds in the year’s first offering, according to people familiar with the deal.
The top-ranked portion maturing in about 10 years yields 120 basis points more than the benchmark swap rate, said the people, who declined to be identified because terms aren’t public. Securities rated BBB-, the lowest investment-grade ranking, yield 790 basis points more than the benchmark, the people said.
The deal is the first since banks pulled back from making new loans to package into bonds in July as Europe’s debt crisis roiled credit markets and sent spreads soaring. Originations have since picked up, according to a Standard & Poor’s report last month. The ratings company is forecasting $35 billion in 2012 sales.
The extra yield investors demand to hold top-ranked commercial-mortgage bonds rather than Treasuries has declined to 2.3 percentage points as of yesterday from 2.61 percentage points at the end of December, according to the Barclays Capital CMBS AAA Super Duper Index.
Relative yields on commercial mortgage bonds determine how attractive Wall Street rates are for property owners and drive the velocity of new offerings. Sales of the debt reached a record $234 billion in 2007, Bloomberg data show. Issuance tumbled to $12.2 billion in 2008 as credit markets seized. The market stayed shut until November 2009. Banks arranged $28 billion in 2011, compared with $11.5 billion in 2010, Bloomberg data show.
The spread on top-ranked commercial-mortgage bonds was as narrow as 60 basis points more than Treasuries when sales peaked in 2007, and as wide as 14.92 percentage points in November 200 in the wake of the collapse of Lehman Brothers Holdings Inc., according to Bank of America Merrill Lynch index data. A basis point is 0.01 percentage point.
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