Amid a flood of issuance (see this article) long-term super-senior CMBS spreads have widened from the levels experienced in early February. Long-term super-senior CMBS with an initial 9.5- to 10-year life had seen spreads steady at 72 basis points (bp) since the beginning of 2013. However, the $629-million long-term super seniors from the UBS/Barclays CMBS issue that priced on February 15th widened to 80 bp. Furthermore, the $398-million long-term super seniors from the Deutsche Bank/Cantor Fitzgerald CMBS issue that priced on February 26 widened to 85 bp.
Meanwhile, the junior investment-grade classes continue to hold steady. The junior investment-grade AA-minus rated class B from both the UBS/Barclays and the Deutsche Bank/Cantor Fitzgerald deal priced at 125 bp, while the A-minus rated class C from both deals priced at 175 bp.
RBS and Wells Fargo are in the market with a CMBS deal that is expected to price the week of February 25. Price guidance is at the levels seen from the Deutsche Bank/Cantor Fitzgerald deal and demand for the issue is good, possibly resulting in price firming at these new levels.
“After a consistent period of loan spread compression for borrowers, lenders have increased their pricing by about 10 bps to compensate for the higher spreads on CMBS classes; since the long-term super-senior CMBS represent approximately 80% of a CMBS deal, there is almost direct correlation between super-senior CMBS spread widening of 10 bp and borrower loan spread widening of 10 bp,” said Michael D. Sneden, Executive Vice President at ValueXpress. “With the swap rate coming in 10 bp this week, the effect on borrowing rates is negligible right now. I just keep my fingers crossed that CMBS spreads stabilize at these new levels without widening further.”