CMBS market participants have been talking about the negative effect that the CMBX has had on spreads in the absence of cash markets flow and or issuance. This was also a hot topic at the Mortgage Bankers Association's (MBA) Commercial Real Estate Finance and Multifamily Housing Convention and Expo 2008. In a panel moderated by MBA Chairman Keiran Quinn, the discussion focused on informing the investor-dominated crowd about the basics of CMBX.
The main discussions were focused on CMBX pricing and how to account for the default protection levels that infer much higher loss rates - 12% to 15% - than are actually occurring. Lisa Pendergast, managing director at RBS Greenwich Capital, predicted that the more normal credit curve (triple-A/triple-B-minus) was in the 250 to 300 basis point range as opposed to today's cash level of roughly 1200. Triple-As traded 180 basis point over swaps at midday Tuesday. In terms of the transparency issue for CMBX, less than $100 million per day is traded in the index but the price swings make it seem as if the volume is enormous.