“Commercial Mortgage Alert” reports that thanks to pent-up demand a flood of multi-borrower commercial MBS issues over the next six weeks is likely to fetch higher prices than the year’s first such transaction. A half-dozen conduit deals totaling $6.5 billion are expected by the end of next month. The year started slow with just one multi-borrower offering to date. CMBS investors and traders said the higher-rated classes of the new issues are likely to price at spreads at least 10-20 basis points (BP) tighter than those on equivalent paper in the $1.2-billion January 24th transaction from Goldman Sachs, Citigroup and Archetype Mortgage Capital.
The bullish outlook is bolstered by activity elsewhere in the CMBS market. The second private-label issue of the year, a single-borrower offering, priced in line with guidance on Wednesday; at 110 BP over swaps, it has a meager 2.2% yield. The $625 million of 4.9-year bonds, all-in-one triple-A tranche, were backed by a loan from Deutsche Bank to New York developer Sheldon Solow on a trophy office building at Nine West 57th Street in Midtown Manhattan. When those bonds hit the secondary market the next day, spreads tightened another 5 BP.
On the secondary market, a CMBS rally that took hold late last year has lost some of its steam over the past two weeks or so, but spreads remain notably tighter than they were a month ago. Ten-year notes with 30% subordination from the Goldman-Citi deal (GS Mortgage Securities Trust, 2012-GC6), which priced with a 120-BP spread at issuance, were trading at 110 BP this week. So were comparable super-seniors from other multi-borrower deals that had been trading with 125-BP spreads at yearend.
Junior triple-A bonds from recent issues, with subordination of 19.1%-22.1%, were changing hands at 230-235 BP this week — down 25 BP from a month ago and 45 BP from yearend. Double-A spreads have contracted to 315-320 BP, down 40 BP since mid-January and 80 BP for the year.