While new CMBS issuance is likely to continue trailing off as of Tuesday afternoon there was still at least one deal in the works and there were signs of continued investor demand for it despite broader market concerns.
A $1.1 billion commercial mortgage-backed security deal that includes about $764 billion in publicly registered tranches was in the works at press time and price guidance for it had remained relatively firm.
With primary CMBS issuance scarce, CMBS demand is being met through secondary market offerings.
"People still have money to put to work," Alan Todd, a strategist at Bank of America Merrill Lynch and one of the authors of a recent research report on the CMBS market, told this publication. "Old bonds are paying down and sitting in cash is not an indefinite strategy."
Also a huge market rally at the end of last week had created a "short squeeze" in the CMBX index that is used to buy protection in the CMBS market. (In a steep rally, those with short positions may be forced to liquidate and buy the asset to cover their positions in a vicious cycle that continually makes the asset more expensive.) Light trading in that area since that time initially suggested the trend had reversed somewhat on Monday, but the index remained susceptible to uncertainties in the broader market at press time Tuesday.
