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While Powell may remain oblivious to the stock market turmoil crushing momo daytraders and billionaire Tiger cub “hedge funds” who have no idea how to trade when the Fed is not propping up their books, once the equity chaos spreads to bonds and other credit products, that’s when the Fed always begins to panic. Well, today may be a good time for Powell to start panicking then because according to Bloomberg, Goldman Sachs has just put an $811 million mortgage-bond deal tied to five luxury hotels on hold, citing market volatility.

The owner of the hotels, China’s Dajia Insurance Group – which must have been in a come for the past two years when rates were actually low – was seeking to use the commercial mortgage-backed securities market to refinance debt tied to the properties, including the JW Marriott Essex House New York, after a planned sale of the hotels fell through during the early part of the pandemic.

To be sure, this is not the first time a CMBS deal has been pulled due to crashing stocks: CIBC paused a $540 million bond backed by credit cards in late April, and two other CMBS issuers halted sales in March.

2022 has been a wild ride for the CMBS market (perhaps nowhere is this more obvious than in iShares CBMS ETF which just reached new record lows)…

Dajia previously issued a $340 million bond for the Montage Laguna Beach in California, and a $1.8 billion CMBS tied to nine luxury resort and urban hotels. Its latest deal, which had preliminary ratings as high as AAA from DBRS Morningstar, was backed by hotels including Westin St. Francis in San Francisco, InterContinental Chicago Magnificent Mile, Intercontinental Miami, and Four Seasons Hotel Washington, D.C.

In other words, it’s not about the quality of the collateral… it’s about the credit market itself.

Dajia got its hands on the properties after the previous owner, China’s Anbang Insurance Group, collapsed. Chinese authorities restructured Anbang into Dajia, which in 2019 agreed to sell a group of 15 hotels to South Korea’s Mirae Asset Management Co. for $5.8 billion.

That transaction, which included the five properties Dajia wanted to refinance, fell through in 2020 as the Covid-19 pandemic hobbled the hotel industry.