Spreads on the BBB and BBB minus stacks of the CMBX commercial mortgage backed securities synthetic index bounced around last week in response to demand for USD200 million-worth of BBB collateral. Trading volumes on CMBX have lagged because it has not attracted CDO issuance linked to the index. The size of last week's bid had the market buzzing the tide may be turning for the index.
The BBB minus stack settled five basis points tighter on the previous week, after initially pulling in as much as 12 bps midweek. Some dealers were reportedly caught off guard, as market makers looked to cover the demand for BBB 2006 collateral, apparently coming from a CDO issuer.
