The fact that the new issue calendar was light in the CMBS market last week only enhanced the already attractive spread levels available to investors. Coming after a supply-heavy July and the effects of FAS 140, spreads battled to tighter levels due to strong pent-up investor demand and an overall interest for well-diversified, high-quality paper. With an expected August slowdown as a backdrop, demand has yet to be sated by both investors and inventory-light dealers. This bodes for stable, if not tighter, spreads over the coming weeks.
In the second quarter, there was over $27 billion in domestic CMBS issuance to hit the Street, most of which was back-ended into July. Over the month, investment-grade issues beat Treasurys by 17 basis points and triple-Bs by 52 basis points, according to Lehman Brothers.