Little has changed in the CMBS market of late. There continues to be decent demand for paper, all the while bid lists are made active by money managers willing to make room for upcoming supply. Spreads remain in a narrow range, and for the most part, there is a preference for triple-As as well as below investment-grade credits.
The reasons to expect the bid for CMBS to continue are rather pedestrian - uncertainty over the state of the economy, not to mention geopolitical risks, have investors looking for sectors of the market that allow a reasonable yield for reasonable risks. Corporate bonds are largely expected to outperform CMBS once investor confidence in the economy returns, but in the meantime, there is too much headline risk in the product. CMBS paper offers the liquidity, diversification, prepayment protection and sound fundamentals not available in other areas of the market.
The calendar, while slow of late, is expected to pick up going into quarter end. The recent pricing of the Salomon Smith Barney/Key Bank conduit is expected to be followed by two other conduits. SSB 2002-Key2 priced its $252 million 9.6-year A/L triple-A A-3 bonds at 47 basis points versus swaps.
Bear Stearns has begun pre-marketing its $921 million conduit with co-managers Merrill Lynch and Wells Fargo, dubbed BSCMST 2002-PBW1, and joint issuers and underwriters Lehman Brothers and UBS Warburg have a $1.4 billion conduit, LB/UBS 2002-C4, making the rounds as well for next week.
Behind that, there is are a pair of conduits from JPMorgan Chase/Wachovia and a Bear Stearns -TOP 8 scheduled for September as well as the 1166 Avenue of the Americas single-asset and at least one floating-rate deal. The chart shows some details of the recent and upcoming issues.