European CMBS has recorded some impressive figures so far this year, as Moody's Investors Service reported volumes are up 124% from the first half of 2004 to 16.6 billion ($19.9 billion). Issuance is expected to remain robust with several analysts recalculating year-end forecasts to closer to the $50 billion mark. Despite the widening seen over the past two weeks, market players say they expect pricing to revert to the narrower levels seen earlier this year, despite the continued deluge of supply.

"It's been fairly active in the market and we are looking at another record year," said Morgan Stanley research strategist Howard Esaki. "We estimate that full-year issuance will be around $50 billion - more than double the volume that we saw last year; $50 billion is what the U.S. saw in 2002. I don't think anyone expected Europe would grow so fast." Moody's puts year-end estimates for CMBS volume around the 35 billion to 40 billion mark.

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