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Life Companies See Big Jump in Returns on Commercial Mortgages
Commercial mortgages originated by life insurance companies posted a big increase in the fourth quarter of 2023, Trepp reported. Participants in Trepp’s LifeComps index reported a total return of 4.93%, a reversal from Q3’s negative return and the first positive total return above 4% from LifeComps since June 2020.
The high total return is primarily attributed to lower long-end interest rates in Q4, according to Trepp. The prospect of rate cuts from the Federal Reserve pushed yields on the 10-year Treasury down 110 basis points during the quarter.
In particular, the office sector showed a large increase in returns, after a negative return in Q3. That said, LifeComps portfolio originations remained “subdued” in Q4, Trepp said, and the Fed’s future course of action on rates remains a question mark.
“With the uncertain rate outlook, the borrowers with loans maturing in 2024 will find refinancing challenging,” said Benqing Shen, director of lending product management at Trepp and author of the report.
- ◦Financing
