The Wall Street Journal thinks so. A new article from Al Yoon at the Journal observed that the recovery in the commercial mortage-backed securities market has stalled out even though before the summer all indicators showed a favorable return on the horizon post-recession. An excerpt from the article:
Investment banks have sold four issues of the bonds, valued at about $6 billion, since the market hit the brakes this past summer because of investor skittishness about the souring economy and an 11th-hour decision by rating firm Standard & Poor's to pull its rating from a deal.
But to sell these issues banks had to structure them differently, providing buyers of the safest bonds more protection than usual. Now, weak investor demand is hampering the sale of the riskier parts of the new issues.
For example, J.P. Morgan Chase & Co. has been trying to sell a quarter of its $1 billion issue for two weeks as investors have been balking at yields on lower-rated classes, according to two investors familiar with the deal. Sales have been slow even as J.P. Morgan raised the risk premiums—or the amount of yield above their interest-rate benchmark—at least twice for these riskier bonds, the investors said.
Meantime, the bank easily sold the senior, safest bonds within days of the deal's announcement. A spokesman for the bank declined to comment. Investors say J.P. Morgan has sold most of the high-risk bonds but took much longer than usual.
The difficulty means that banks may have to go even further to make commercial mortgage securities attractive to investors. "Everyone wants to be in a safe haven, but once you go down in the capital structure, it's not looking so good," said Julia Tcherkassova, a strategist at Barclays Capital in New York.
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