In early January 2013, various sources reported that the commercial mortgage-backed securities (CMBS) market continues to remain strong and will likely increase in 2013. Despite historically low yields on CMBS, investors have continued to purchase risky assets, allowing lenders to offer lower rates and tighten spreads between standard, multi-loan 10-year CMBS and benchmark interest-rate swaps.

According to the Wall Street Journal, this spread is projected to drop below its current rate of 0.83% to 0.75% in 2013, which means that issuers of these securities are able to continue to reduce the interest rates they offer on the securities and still attract investors. If investor demand remains high, lenders will be able to keep interest rates on commercial loans low, benefitting borrowers. Many industry experts are expecting this trend to continue in 2013, with a 25-150% increase in issuances over the $40 billion of CMBS issued in 2012.

Industry predictions of a growing CMBS market in 2013 are bolstered by Bank of America, Merrill Lynch and J.P. Morgan Chase's plan to issue $600 million of CMBS this week. The issuance will be backed by a 12-year interest-only (I/O) loan on the Queens Center Mall.

However, some believe that the CMBS market has reached a crossroads. While many of the factors that made the CMBS market attractive in 2012 still remain, substantial risk combined with low yields could convince some investors that the market is ready for a pullback. There has also been some concern voiced by market participants in recent months that the investor demand for CMBS tranches has resulted in a lowering of origination standards for loans included in some of these new issues. Additionally, with the timely passage of the fiscal cliff deal, equity markets could be more attractive to investors and swap rates could increase, driving up the cost of borrowing and leading to a slowdown in the CMBS market.