Commercial mortgage-backed securities had a tough weak early on, with little buying or selling last Monday or Tuesday, but strengthened significantly towards the week's end with a "reasonably-priced" deal from Chase Securities, underwritten by Goldman, Sachs & Co. and Salomon Smith Barney.
The largest class in the $250 billion deal, a $392 million 10-year triple-A piece, sold at a yield of Libor plus 43 , or 150.25 over Treasurys. The five-year $125 million triple-A-rated piece sold at 31 basis points over Libor, or 117.25 over Treasurys.
"I'd say the Chase deal priced pretty well, considering that it was sort of a weak market early this week," said a CMBS trader. "With CMBS weakened in this manner, I'd say it is a statement to have gotten the deal done at that level."
The benchmark 10-year swap spread grew to a record 115 basis points at the end of the week. Observers mentioned that the stock market's declines affected the market greatly, sending the cost of credit higher.
"Spreads have continued to widen out on all credit product," said another CMBS desk, "however, with the rally in the Dow in the last two days and financial stocks, that helps some of the financial-related corporate issues, which are generally thought to be a comp for CMBS. The sector bounced back on Thursday, however."
Of significance was the fact that Chase marketed the bonds in this transaction over the Web. Most of the data was posted on the Web, which reportedly streamlined the process and making it a confusion-free affair.
While bonds were not sold on the Internet, collateral information was at the fingertips of buyside constituents, sources said. Additionally, all of the data regarding different tranches was very easy to access.
A $36 million double-A-rated piece sold at 164.25 basis points over Treasurys, while a $33 million A-rated piece sold at 178.25 over. A $10 million A-minus piece priced at 18.25 over Treasurys.
On Friday, Salomon Smith Barney was scheduled to launch its $334 million CMBS transaction in conjunction with Allied. Price talk for this deal was not available by press time.