After a lull in new CMBS issuance, the market easily absorbed three multi-borrower offerings this week. Senior classes priced in line with dealer guidance, while junior classes priced at levels tighter than seen in the last CMBS issue at the end of March.
A total of approximately $3.9 billion in CMBS priced during the week. On Tuesday, Deutsche Bank, Jefferies and Cantor Fitzgerald led a $1.2-billion offering in which the long-term, super-senior bonds were priced at 86 basis points (bp) over swaps. On Wednesday, two deals priced, a $1.4-billion transaction led by J.P. Morgan and Barclays and a $1.3-billion transaction led by Wells Fargo and RBS. The super-senior bonds from those deals priced at 87 bp over swaps. These spreads were consistent with the 88 bp level for super-senior bonds in the last CMBS deal.
However, the more junior investment-grade classes of bonds priced at spreads that were substantially tighter than the March deal as investors looked for additional yield and pent-up demand for the bonds exceeded supply. The bonds from the three recent deals traded at anywhere from 15 to 30 bp tighter than the March deal.
“The market has shown considerable stability so far this year,” commented Jim Brett, Head of Underwriting at ValueXpress. “Along with the slow but steady tightening of CMBS spreads, we have seen fairly dramatic reduction in loan spreads for borrowers, on the order of 30-40 basis points. Combined with the drop in the Swap rate, the all-in rate to borrowers is in the 4.5% area on a 10-year fixed-rate deal, a level not seen for over a year.”