CMBS market steady despite widening spreads


Despite concern from some – including the Federal Reserve – about widening spreads on investment-grade commercial mortgage-backed securities, metrics on CMBS issuances and falling delinquencies indicate a fairly sunny outlook.

In minutes detailing the Federal Reserve’s meeting last month – in which the Fed decided it would maintain interest rates near zero – the central bank noted that spreads on CMBS “widened noticeably in August, reportedly a result of heavy issuance as well as the increased volatility in broader financial markets.”

But analysts have pointed to metrics indicating such conditions as more of a temporary blip than a sign of a more pronounced slowdown in the controversial market.

“There has been a widening of spreads,” Sean Barrie of CMBS analytics firm Trepp told The Real Deal, citing “a lot of deals stacking the opposite ends of the spectrum” in terms of loan-to-value ratio. Barrie noted, however, that so far October has “seen spreads stay even keel,” which he characterized as a “good sign.”

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