NEW YORK CITY-Payoffs are happening. Locally based Trepp reports that the percentage of loans getting paid off by their balloon date was 61.8% last month—the fifth time in six months that the rate has exceeded 60%. But the February numbers are also well ahead of the 12 month average of 49.2%.

What does it all mean? It continues the upward trajectory of the market. “Refinancings continue to happen at dramatically higher level than a year ago,” Manus Clancy, senior managing director of Trepp, tells GlobeSt.com, "and that bodes well for CRE lenders and borrowers.”

“Six months ago, we noted that the payoff rate could move to the upside for the remainder of 2012,” says Clancy. “We mentioned that loans reaching their maturity date would likely be more heavily populated with loans from earlier vintages, and that assets from that time frame were made with lower leverage and more reasonable valuations.” He added that the past six months results have confirmed the trend.

He warns investors to tread lightly when trading IOs and older-vintage premium triple-A bonds. Spreads, he notes have dropped over the past few years “where some interest-only classes trade to a negative spread in a 100CPY scenario,” he says.

“The negative spread represents a bet on the part of investors that many of the loans will extend once they reach their maturity date. We underscore the warning as much today as we did last summer.

“The makeup of the underlying pool is certainly a consideration,” he continues. “Loans from older vintages will have a much better chance of paying off on time than loans from 2007. However, with new-issue CMBS spreads at their tightest levels in four years, and with the Treasury curve near historic lows, more loans should be able to refinance now than at any time since 2008.”