MyStratWeekly – April 4th 2023

Topic of the week: Commercial real estate in a perfect storm?

• Turmoil in regional banks, which are highly exposed to commercial real estate, cast doubt on the risk of refinancing for CRE loans this year;
• The tightening of credit conditions with the rise in rates is an additional element of tension;
• Real estate asset values have started to deteriorate, lagging behind the violent adjustment of REITs and listed real estate early on in 2022;
• Very wide spreads, over 900 bp on BBB CMBS, factor in a sharp deterioration in the sector despite reduced default rates.

Market review: The hope for a return of confidence

• Euro area: signs of stronger growth and higher core inflation;
• The banking crisis is dissipating;
• Equities rush towards quarterly close;
• Significant decline in rate volatility.

Stéphane Déo's and Axel Botte's podcast

• Latest economic figures: surveys and inflation;
• Phillips curve or no Phillips curve?
• American commercial real estate in turmoil?

Chart of the week

For the first time, more electricity has been generated by renewables in the US, surpassing coal. In 2022, renewables produced more than 900 TWH of electricity than the 800 TWH produced by coal.
However, to achieve carbon neutrality emissions targets, the US should increase carbon neutral sources. Natural gas accounts for 40% of electricity production in 2022, while renewables barely exceed 20%, which is comparable to coal (and nuclear).