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Tuesday, 25 June 2013

CMBS Spreads Shoot to 12-Month High

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Commercial Real Estate Direct Staff Report

Financial markets, CMBS included, remain volatile.

A benchmark bond that's widely referenced by CMBS investors, the A4 class of GS Mortgage Securities Corp. II, 2007-GG10, was 20 basis points wider yesterday, at 160 bp more than swaps. That continued a trend that started last week, after Federal Reserve Chairman Ben Bernanke made it clear that the Fed would start tapering its purchases of government securities and mortgage-backed securities. Its purchases have served to shore up bond prices and reduce long-term interest rates.

The expectation that the Fed would no longer backstop Treasurys has resulted in a sell-off in that market. The yield on the benchmark 10-year Treasury, for instance, increased to 2.64 percent yesterday. That's up nearly 100 basis points from less than two months ago and up from 1.86 percent at the start of the year.

It's also resulted in investors pushing down prices they pay for fixed-income securities, including CMBS. New-issue CMBS took it on the chin last week. The benchmark class of the latest conduit to price, Morgan Stanley Bank of America Merrill Lynch Trust, 2013-C10, saw a spread of 120 bp more than swaps. That's a whopping 17 bp more than the 103-bp spread for the comparable class from JPMBB Commercial Mortgage Securities Trust, 2013-C12, which priced a week earlier. The last conduit to see such a wide spread was WFRBS Commercial Mortgage Trust, 2012-C8, which priced exactly a year ago.

But the widening further down in credit wasn't as dramatic. The Morgan Stanley deal's junior AAA class, class A-S, priced at a spread of 150 bp more than swaps, just 5 bp wider than the JPMorgan deal.

Needless to say, legacy bonds, that is those issued before 2009, have also gapped out. Dealers last week were quoting super-senior AAA bonds at a median spread of 135 bp more than swaps. That's up 15 bp from the week before.

"We're just the tail being wagged by the dog," said one bond investor, explaining that the upward movement in CMBS spreads was driven by events outside of the sector. "This has nothing to do with commercial real estate."

Investors had long expected the Fed to eventually taper its bond purchases, but many evidently hoped, or expected it to last longer. "He was dove-ish for so long," said another investor.

Not helping matters is the fact that the pipeline of upcoming deals remains healthy. Two additional deals were put into the market in recent days. Their issuers initially had hoped to price them by the end of this week, before the end of the quarter. But given pricing pressures, that schedule might be tough to keep.

JPMorgan late last week launched its latest conduit, JPMorgan Chase Commercial Mortgage Securities Trust, 2013-C13, which is backed by $961.2 million of loans that it, GE Capital Corp. and Redwood Commercial Mortgage Corp. contributed. And Cantor Fitzgerald, Deutsche Bank and UBS have launched as $1.3 billion deal that includes loans contributed by the three underwriters as well as KeyBank.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.


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“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

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Additional Info

  • Syndicate to Realpoint: No
  • Subject: CMBS - non-deal specific (CMBS-G), Commercial MBS (CMBS), Research (RES)
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Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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