6.12.14: Super-Senior CMBS Spreads Decline to 16-Month Low

The super-senior benchmark AAA-rated class of a multi-borrower CMBS conduit offering led by J.P. Morgan priced on June 12 at the tightest level since February 2013. The benchmark class priced at 79 basis points (bp) over swaps. The last time the CMBS market achieved that level was on February 5, 2013, when a multi-borrower issue led by Morgan Stanley and Bank of America priced at 72 bp over swaps, which was the lowest level since the restart of the CMBS market in 2010.

Since the beginning of 2012 when the super-senior AAA-rated class was at 120 bp over swaps, the bond has been on a gentle roller coaster. The spread rose in the first half of 2012, peaking at 160 bp in June 2012 due to global economic uncertainty. But by fall 2012, the spread had declined to 83 bp, the low for the year, on its journey to the market low of 72 bp over swaps in February 2013.

But after a few months of stability in the beginning of 2013, the market roiled when comments made in May 2013 by then-Federal Reserve Chairman Ben Bernanke indicated that the central bank could begin tapering its bond-buying program. Spreads widened to 128 bp over swaps by summer 2013.

As the balance of the year progressed and tapering turned out not to be the end of the world, the spread on benchmark AAA-rated CMBS began a steady decline to the 79 bp level reached this week.

Will the spread continue to decline or will the roller coaster start its ascent once again? Stay tuned.

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

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