10.10.12: CMBS Buyers Focus on Lower-Tier CMBS

The CMBS rally that took hold at midyear has been changing shape lately, according to Commercial Mortgage Alert. Increasingly, yield-hungry bond buyers are clamoring for subordinate paper, typically junior classes AS, B and C, which carries lower subordination levels and is riskier than senior CMBS.

While new-issue prices for super-senior bonds have leveled off since late September, they have jumped sharply for the junior classes of investment-grade paper. Also, values have soared in the secondary market on the equivalent classes of both post-crash issues and legacy transactions.

“There is just not enough to go around,” said one investor. “The stuff that’s getting the most attention now is anything that’s yield-y, so people are moving down the capital stack. Meanwhile, prices for super-senior bonds appear to have stabilized following a summer surge because the resulting yields aren’t as attractive as they were just a month ago.”

“Country Bank is a buyer of class AS and class B CMBS, and we are finding the spreads grinding 5-10 basis points tighter as each new deal prices,” commented Michael Sneden, Executive Vice President of ValueXpress.  “Plus, we are getting our allocations cut on each deal; most recently, we received only $3 million of class B bonds from the WFRBS 2012-C9 deal in which we placed an order for $8 million of bonds.”

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This entry was posted in CMBS, CMBS Securities, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , . Bookmark the permalink.

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