The CMBS markets have seen a tremendous amount of interest this year, mainly on the heels of corporate market concerns that soured many investors. Upon quick reflection, the investment grade curve has seen tremendous flattening due to the sharp demand in triple-B credits -thank you CDO participants- to the tune of 20 basis points, the narrowest spread in the last four-plus years.

As that was being exploited, up-in-credit recommendations were rampant as well, leaving triple-As now exhausted and fairly valued. The latest value squeeze that has fallen victim to over-interest is the IO sector. Once notably cheap, especially on the weekly trimming of supply projections, IOs are now near their historical tights.

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