Member News

The ‘New Normal’ in CMBS Results in BBBs Widening Sharply

For investors wondering just how impactful the 2016 sell-off has been on mezzanine CMBS, the answer came on Wednesday. The latest conduit deal to price saw the “high” BBB price in the mid-600 range over swaps and the “low” BBB clear the low-mid 800s over swaps. (The latter put the all-in yield above 10%.) Those numbers were 200 basis points wider than the last BBB high to price in December, and more than 200 basis points wider than the last BBB low in December. The new levels would seem to suggest that new deals with just one BBB would have spreads price with a 700 handle. The last 2015 conduit to price with only one BBB class saw that bond price at S+525.

US stocks have been playing a lot of “two for me, two for you” over the last week. Every day seems to be either a 200 point jump or 200 point dip in the Dow, and yesterday was the latter. The Dow fell 223 points (1.38%) as the Fed announced they weren’t ruling out a rate hike in March despite the recent market volatility. Prior to the announcement, stocks were largely flat.

After a few days of calm, CMBX was back to its volatile ways on Wednesday. CMBX spreads moved sharply wider, especially those lower in the stack. The CMBX 6 AAA and CMBX 6 BBBspreads were wider by 1 and 12 basis points, respectively.

In cash, spreads also moved wider. The impact in cash was smaller than for CMBX, especially down the credit curve. Bid list volume totaled about $200 million and the GSMS 2007-GG10 A4 ended at 256 basis points over swaps, one basis point wider for the day.


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