This is from one of the biggest banks in the country- "All travel, corporate meetings, client/ prospect meetings, etc are shut down. All require pre-approval. Any term sheet that was out will be honored begrudgingly but if it's hospitality there is more of a likelihood the bank walks from it. If the client has another term sheet in hand and the bank was getting one to the borrower imminently the new directive is to tell the client to take that other term sheet. They are expecting spreads to increase quite a bit across the board and will be looking to implement libor floors".
conduit spreads have also blown up and the cmbs market seems to be shutting down similar to 08.
IS THE WORLD ENDING BECAUSE OF TWO WEEKS?!?!
The thing the focus on here is that we are making decisions that will have an impact for 5-10 years (if we're talking about loans here). I understand why lenders want the markets to settle so they are not potentially F'ed for a decade over a month blip in the interest rate market. Its an over exaggeration to say markets are "shutting down." Everyone can afford to wait a couple weeks to see if this is a new normal or a speed bump.
I don't want to downplay the effect I believe the coronavirus will have in the US but all the movement going on the last couple weeks has been predictive, preemptive, as opposed to reactive. This isn't 2008, we didnt just have the largest commercial lender in the US shut its doors overnight.
If indexes maintain these levels yes spreads will go up, that just happens just like when spreads came in when the 10 Yr hit 3% last year. Many mortgage documents already have LIBOR floors, because Europe has seen negative interest rates lenders have implemented 0% LIBOR floors already, that seems to be less of an issue as LIBOR is higher than the 10 yr UST and 1 Mo LIBOR spent about 5 years at levels much lower than it is today.
I care so much more about info coming out around supply chain and consumer demands than I do about what the banks are up to, Europe has dealt with negative interest rates for a long time. Banks dont run the world they just adapt to it and right now lenders need to take a breather to let things shake out. Again the market can afford to back off for a few weeks considering the length of the decisions we're making.
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