U.S. Treasury and the Fed extend TALF

The U.S. Treasury and the Federal Reserve extended the TALF program to March 31 for ABS and legacy CMBS deals and June 30 for new CMBS deals. The total for these programs is $200 billion.

Spokespersons for the Treasury and the Fed said: "Conditions in financial markets have improved considerably in recent months. ... Nonetheless, the markets for asset-backed securities (ABS) backed by consumer and business loans and and commercial mortgage-backed securities (CMBS) are still impaired and seem likely to remain so for some time."

Term Asset-Backed Securities Loan Facility (TALF) has been successful for the consumer ABS market, with $62 billion in deals done this year and a dramatic drop in funding costs. The benchmark used is a one-year bond backed by prime credit. The spread over Libor has fallen about 150 basis points to 60 bps over Libor.

No new CMBS deals have been struck in the first half of the year. The main reason for this is that CMBS deals are more complex and require more time to put together.

So as far as the financial markets are concerned, the Fed is saying that we are not out of the woods yet and the market will remain "impaired" into next year.