Short term rates will remain near the current levels because the FED cannot raise interest rates yet and risk slowing the economy. As the economy does improve, macro investors will move their investments from the longer term T-bills into other more attractive assets. With more investors selling their T-bills, the price will lower sending the corresponding T-Bill rate higher.This all makes sense. And with CMBS down to a trickle (from $78.5B to $10.8 B in the first four months of 2007 compared to 2008, and a recent prediction of but $35 billion for the whole year), it is understandable.
Here's another take from NREI (courtesy of Traffic Court):
The market for commercial mortgage-backed securities (CMBS) will begin to recover when issuers and bond buyers agree on pricing, probably late this year or early in 2009, observers say. Once that begins to happen, however, a potential flood of pent-up trading could plunge the market back into price volatility and value losses.Yeah, there could be a flood at some point, but so long as fundamentals are sound we ought to be all right. Layoffs that also are combined with tenants dumping space or not renewing leases would be the worrisome factor. But we don't have a glut that I can see, at least not in many sectors.
The worry that CMBS investors will unload large volumes of bonds and affect pricing is one of the forces stalling the CMBS market today, according to real estate attorney Doug Buck, a partner at Foley & Lardner LLP in Madison, Wis. “A lot of people are holding these CMBS issues in their portfolios right now and the fear is that these would be dumped onto the market and the pricing would come way down,” Buck explains. “There’s a huge quantity of these things that are on people’s books, and they’re not really trading at the moment.”