CMBS prices continue to climb as a result of low Treasury yields and steady spreads. The bigger story, however, was the strength in AM and AJ bonds over the last five trading days including Friday, August 27, 2010. According to Trepp, Mezzanine AAA bonds (AMs) from 2005 and 2006 started to trade above par (100) for some of the strongest issues.
The AM market has remained largely immune to any weakness lately and Monday, August 30, 2010 was no exception. Trepp reported a host of AM and AJ trades once again lit up bond dealer screens, and the results continued to impress, particularly a set of late-day AM and AJ bonds from 2005 and 2006. The AM bonds all covered above of $99, while the AJ bonds covered in the low and mid-$90s.
“The CMBS market continues to see a steady increase in prices” said Michael D. Sneden, Executive Vice President at ValueXpress. “We advised a client on the purchase of over $30 million in AM class CMBS over the past three months at prices in the low $90s, but at $100, I do not know where the next opportunity to make money in CMBS will come,” said Sneden. At these prices, the good news is that issuers are likely to be salivating at the potential profits from new CMBS issues, should they find qualifying loans to package into new CMBS.