Word on the Street

·          Yields on 10-Year Treasuries have been creeping upward since December.

·          Stronger than expected employment growth narrowed hopes of rate cuts in the near future.

·          The Fed meets for a 2-day meeting on January 30^th and 31^st.

·          The Fed Funds Futures probability model suggests about 98% probability that the Fed will hold rates steady during the upcoming meeting.

·          The mild winter and above average crude oil inventory have helped bring oil prices lower. This should provide some relief to a slowing economy.

Building Matters

·          Federal Regulators have issued final guidance on commercial real estate lending.

·          Expect banks to increasingly scrutinize each deal, especially construction lending.

·          The retail sector appears to have seen its peak cycle.  On the other hand, the apartment sector is riding the up-wave of the cycle.

·          Fitch Ratings expects CMBS upgrades in 2007 to fall shorter than upgrades in 2006 and cautioned on the elevated number of interest-only loans.

·          However, upgrades last year outweighed downgrades 34:1, and growing uses of defeasance should set CMBS for another shining year.