NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) attended this year’s HYDRA conference held at the New York Athletic Club. Opening remarks were made by Lisa Pendergast, executive director of CREFC, which hosted the event. Despite weather-related concerns, the conference appeared to be well attended.
Following two days of panel discussions, some positive themes emerged, as follows:
- Despite being long in the tooth, the cycle still has legs (consensus was at least 18 to 24 months) and the pending downturn will be relatively benign in comparison to the last recession.
- Credit fundamentals remain stable, lenders are still exhibiting discipline and U.S. securities, across sectors, remain attractive globally given their strong relative yields.
Nevertheless, a slew of concerns also surfaced, including:
- regulatory and political uncertainty
- inflated asset valuations manifested in high CRE prices
- a deceleration in transaction volume – driven in part by a reduction in offshore capital inflows
- the potential for “overconfidence” in tax reform, which could amplify a cyclical downturn
- liquidity drain stemming from the Federal Reserve’s unwinding of its balance sheet
- end-of-cycle liquidity disguising underlying issues
- while U.S. unemployment rates are at historical lows, wage growth and inflationary pressures are expected; this will put an upward pressure on interest rates
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About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.