CMBS Spreads Tighten Slightly
Spreads on newly issued commercial mortgage-backed securities tightened slightly this week, moving in five basis points to swaps plus 101 for the benchmark 30% subordination, AAA-rated bonds. This is the first time in nearly two months that these bonds didn't widen, noted Lisa Pendergast, a managing director at RBS Greenwich Capital.
There are three new deals being marketed this week, including a deal from Morgan Stanley's PWR shelf and a fusion deal from JP Morgan Chase that has the highest subordination levels seen since 2004. The deal's AJ tranche has a subordination level of 15.5%, Pendergast noted.
Bank of America is also expected to bring a fusion deal before year end that will be the last deal of 2008. Reports are mixed on how successful issuers are at placing bonds from their deals, with one investor noting that issuers may just want to convert loans to CUSIP bonds because this allows the issuers to achieve better balance sheet treatment.