Monetary Policy Report submitted to the Congress on July 18, 2007, pursuant to section 2B of the Federal Reserve Act
Figure of spreads of ten-year investment-grade commercial-mortgage-backed securities over swaps, 1997-2007
Data are plotted as two curves. The spread over swaps of securities rated AAA holds in a tight range of about 20 basis points to 40 basis points from the beginning of 1997 through the end of August 1998. It then begins to widen, reaching a peak of about 110 basis points in mid-October 1998. It then falls back and fluctuates within a relatively narrow range of about 20 basis points to about 75 basis points between the end of 1998 and mid-July of 2007. The spread over swaps of securities rated BBB starts in 1997 at about 80 basis points, generally narrows to about 40 basis points in mid-1997, and then rises to nearly 100 basis points by early 1998. It widens sharply in mid-1998, reaching a peak of more than 250 basis points in early November 1998. It then narrows to about 110 basis points by mid-1999 and fluctuates within a wide range of about 60 basis points to roughly 200 basis points through mid-July 2007. The spread rises significantly in late February 2007 and varies within an elevated range through mid-July.
Note: The data are weekly and extend through July 11, 2007.
Source: Bloomberg.