On July 23, Wells Fargo, Bank of America, Morgan Stanley and NCB priced the benchmark AAA-rated class of a $1.302-million multi-borrower CMBS conduit offering at 84 basis points (bp) over swaps, in line with price guidance. This offering follows the July 19th pricing of a $1.4-billion offering by Citigroup, Deutsche Bank and JP Morgan in which the AAA-rate class priced at 80 bp, the tightest new-issue spread since early May. Both deals saw solid demand from bond buyers. Other classes of both the Wells and Citi deals flew out the door as well. The AS class, split rated AAA/AA/AA-, priced at 110 bp over swaps, an improvement of 5 bp over recent offerings.
The BANK and BMARK programs, which are operated by some of the sector’s largest banks and dealers, typically command relatively tight spreads. The benchmark classes of their previous deals in late May priced at 86 bp.
Market participants note a lot of demand for CMBS securities, while supply is not growing. With the prospect of the Federal Reserve lowering interest rates, buyers are snapping up bonds before yields on CMBS decline. Investors agree that demand remains relatively high, which bodes well for upcoming conduit deals. A $1.3-billion offering from Citi, Deutsche and Goldman Sachs is expected to hit the market in the coming days, and another offering is being teed up by Wells and other contributors.