In the CMBS sector, spreads have been tightening across the longer-maturity single-A rated tranches, and within those credits the double-A sector has been outperforming. The spread between triple-A and double-A is only six basis points, where the historical pick-up has been seven basis points over the last year and nine basis points over the last three years on average. The pickup for going further down credit shows that the double-A to single-A spread is 10 basis points, when it used to be nine basis points on average over the last year.

In recent comments from Merrill Lynch, Roger Lehman, managing director of mortgage research explores some "inefficiencies" in the triple-A sector. Lehman believes the traditional triple-As - basically tranches from deals prior to the senior/sub triple-A structure that began with the Oct. 27, 2004, CSFB 04-C4 transaction - offer good value, especially when compared to both of the new senior and junior triple-A tranches.

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