The chart below provides more details on the commercial real estate drama. 69% of the CMBS loans that were supposed to mature during the month of June of this year, defaulted, and it appears that for August the rate of defaults is 84%. These cash flows are contractual obligations and therefore expected to be used by investors to buy or pay off other debts, so there is some domino effect. Banks (and pension plans) may start selling these bonds at fire sale prices because otherwise they will need to respond with their capital, which right now is in jeopardy due to losses in their vanilla bond portfolio. #ratehikes and work-from-home are creating a big hole in the office real estate market, that accounts for 16% of the US commercial real estate.
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