Bonds News

UPDATE 1-Commercial mortgage bond defaults may double-Fitch

(Adds details, yield spreads)

NEW YORK, Jan 7 (Reuters) - U.S. commercial mortgage-backed bond defaults may more than double this year as the economic recession hurts office building, retail store and multifamily housing assets, Fitch Ratings said on Wednesday.

Defaults could rise to about 150 basis points of rated commercial-mortgage-backed securities (CMBS) originated in 2005 to 2007, Fitch analysts said in a statement.

CMBS defaults rose by 60 basis points in 2008, to 83 basis points, they said.

The increase in defaults accelerated in the fourth quarter, they said. On an annualized basis, defaults for 2005-2007 CMBS originated at the market peak hit 110 basis points, 222 basis points and 65 basis points, respectively.

“With a continued global recession expected to last through much of next year, commercial loan defaults are likely to rise at pace equal or exceeding fourth quarter levels,” Susan Merrick, a managing director at Fitch, said in the statement.

Despite the negative outlook on delinquencies, CMBS have stabilized since mid-November after ruthless selling pushed yield spread premiums to record levels. Spreads on the top-rated part of the CMBX-5 derivative index are hovering around 550 basis points over their benchmark, down from more than 800 basis points in November. (Reporting by Al Yoon; Editing by Leslie Adler)