Benchmark spreads on CMBS conduit securities tightened this past week despite a wave of new issues hitting the market before yearend. Bond buyers usually have reduced funds at this time of year as they typically have invested their annual allocations and often sit on the sidelines until the new year. But the bonds that hit the market from four CMBS conduit issues totaling $4 billion were readily sold at tight spreads.
The long-term, super-senior AAA-rated bonds from a $1.2-billion offering by Bank of America, Wells Fargo and Morgan Stanley priced at 88 basis points (bp) over swaps on December 11. It was the first time a comparable class fetched a spread below 90 bp since July 23. Market pros said the overall tightening was partly due to bond buyers’ awareness that the heavy flow of deals is about to end and the market will be quiet for the next few weeks. “We’ve been very impressed by the level of demand,” said one investor.
Borrowers care about CMBS securities prices because the loan spreads found in CMBS conduit loan Term Sheets are derived from CMBS securities prices. Tightening CMBS securities prices will quickly find their way into lower loan spreads in Term Sheets. If the trend continues, borrowers should see a 5- to 10 bp reduction in new CMBS conduit loan offers.
To get an indicative loan spread for your next CMBS conduit loan, contact a member of the ValueXpress team: Mike Sneden (firstname.lastname@example.org), Dennis Suh (email@example.com), or Gary Unkel (firstname.lastname@example.org) for a free, no-obligation loan quote.