Given the rocky nature of the markets on Wednesday, we thought we’d start TreppWire with a little chicken soup for the CMBS soul. The servicer for the $3 billion Stuyvesant Town/ Peter Cooper Village loan increased the appraised value of the property according to data received this week. Previously valued at $3.4 billion as of September 2013, the loan’s appraisal was bumped up to $3.5 billion this month. As a result, the appraisal reduction assigned to the note was lowered. The lowest reported appraised value for the property was $2.8 billion in 2010-11.
If the ups and downs of the Stuy Town/Peter Cooper value were enough to induce investor sea sickness over the last five years, we can only imagine how much Dramamine was needed to stomach Wednesday’s stock market maelstrom. Equities started the day deeply in the red, cut the losses by more than half, re-tested the lows in the mid-afternoon, and finally ended the session down about 1%. At their worst yesterday, stocks were off by about 3%.
The yield on the 10-year Treasury continued to hurtle lower on Wednesday, dropping another 12 basis points to 2.08%. Treasuries also saw tremendous volatility, as the yield on the 10-year fell to well under 2% at its worst point in the day. Oil prices did rebound, however.
It’s fortunate CMBS investors don’t see second-by-second tick changes in CMBS cash bonds the way equity buyers do, or they, too, might have made a detour to the sick bay. Nonetheless, unlike recent sessions in which CMBS investors shrugged off stock market volatility, things finally seemed to catch up to the CMBS cash market on Wednesday. Much of the widening was likely in response to the collapsing Treasury yields, but spreads were certainly headed upward on Wednesday.
About $700 million was out for bid during the wild trading session. By the time the dust settled, new issue AAA paper was wider by three basis points or so. New issue AA bonds were off by five to seven basis points, new issue A- bonds were off by 10 to 20 basis points (especially those with the longest average lives), and BBB- bonds were off by 15 to 25 basis points. It was more of the same in the legacy space, with legacy AMs wider by 10 to 20 basis points and legacy AJs wider by 20 to 30 basis points (or more for weaker names).
It was another rough day for anyone long the CMBX indexes, which underperformed cash again. The CMBX 6 AAA spread ended two basis points higher at 86 while the CMBX 6 BBB- spread moved up 16 basis points to 331, making a 32-basis-point move over the last two days. The spread on the CMBX 6 BB index jumped 12 basis points on the day.
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