The $850 million GE Capital Mortgage Trust 2002-2 brought via joint leads Deutsche and Banc of America priced last Wednesday to strong demand driven by the greater than 30% multifamily asset exposure, which attracted decent GSE and other interest. The deal, co-managed by Salomon Smith Barney, JPMorgan, and Merrill Lynch, priced off of the old yield curve, making the benchmark the Treasury due Feb 2010 rather than the newly auctioned 10-year.
The deal saw a slight structural adjustment, as a loan was removed from the pool. Aside from modest changes to the tranche sizes, spreads were firmed up from guidance levels, with the triple-A 10-year tranche done at 45 basis points over the swap curve versus 45-46 basis points at pre-launch.
Prior to GECMT, the last conduit to price was the $817 million JPMorgan issue from August 2nd. The deal saw its 9.7-year WAL tranche print at 47 basis points over swaps, the widest level since May. With the GECMC issue pricing two basis points through JPMC, it is a good sign that CMBS spreads may be finally on the mend after weeks of cheapening tied to a sagging equity market and concerns about the soundness of the economy.
The calendar is pretty thin now, with two conduits to consider for the rest of August - one from joint leads Salomon and Key Bank and one from BofA - that totals nearly $3 billion. September is already being viewed as a light month.
What does all this mean for spreads going forward? There are a few naysayers that would like to point to the troubles of the corporate world and sagging stock market to opine that spreads will be under some pressure, widening to at least 50 basis points for 10-year triple-As. The reduction in corporate cross-over buying is one major issue for the retractors, as well as the general lack of a bid during the widening of swap spreads over the past week or so as it came hand-in-hand with a further treasury curve rally.
Support for the sector, however, points to a ongoing interest from the cross-over buyer, with some skepticism that next week's August 14 corporate accounting approval will not be a placebo for the market.