search   Knowledge Bank printable version
 News
 Knowledge Bank
 Deal Information
 International
 Software
 Publications
 Industry Events
 Advocacy Forums
 Links
 Site Utilities
 Contributors
 Free Offers
 Home

Click here to
Update Registration
Information

Please be advised that the use of Securitization.net ®
is subject to the
Terms & Conditions

of use and the
Privacy Policy

Download

Best viewed in

Knowledge Bank > CMBS
Select an area


Free trial of Total Securitization for site members.

CMBX Lowers Quality To Attract Investors
Total Securitization -- Institutional Investor News (October 27, 2006)

CMBX, the commercial mortgage-backed securities derivatives index, rolled last week and dealers took the opportunity to add BB-rated credits in a bid to attract new investors. The idea is that extending the range of the index-until last week it referenced AAA to BBB credits-will increase relative-value trading opportunities and bring new investors to the index.

The credits in CMBX 2 have lower subordination levels, higher loan-to-value ratios and higher debt-to-service coverage ratios. Traders said that as a result they expect the new index to trade between five and seven basis points wider than the first set.

A popular trading idea from sales desks across the Street has been selling protection on the CMBX 1 and buying protection on CMBX 2. Another trade that is being recommended is selling protection on BB credits while buying protection on the BBB minus slice of the index. This position is attractive as it is a positive carry. The investor collects the higher spread for selling protection on the BB bonds while paying the lower spread on BBB. In the event of widespread deterioration in the commercial real estate market, losses will eat through the BB and BBB minus bonds, but still be covered.

Samantha Rowan
Managing Editor
Real Estate Finance & Investment
Securitization News
(212) 224-3996
srowan@iinews.com

 

 

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

Legal Notices | Attorney Advertising | Site Index | Contact Webmaster

*The site links listed on this web site are for reference use only.
The firm does not necessarily sponsor, endorse or verify the accuracy of the content contained in any of these sites.