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Tuesday, February 16 2010 00:00 |
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Today's Word: Global Cash Flow
The Ten Year Treasury Bond continued to trade within a narrow band around 3.65% the first trading day of the week. Observers noted both slackening foreign demand for US Treasuries (China has been a net seller in recent months) and a diminishing fear of inflation. Pimco and Blackrock were big sellers of TIPS, inflation protected securities, and TIPS breakeven spreads declined to 2.25% indicating investors’ view of the likely level of inflation. Very slow growth is seen as the new normal.
We had lunch with the Chief Lending Officer of a major real estate lender to the Bay Area last Thursday. They like the loans we have been finding and would like to put out between $150 and $200 million in the Bay Area this year. There will be no diminution of credit quality BUT they are reviewing their seismic policy. She emphasized they are looking harder than ever at global cash flow. It’s not enough to bring them a stable asset; their feeling, and this is echoed throughout the lending community, they have to understand the portfolio of the Borrower. Even in residential lending, regulators now prohibit loans based on value and credit alone- the Borrower must show the income to repay that loan and all their obligations
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