With the currently low interest rates and the increased number of IO loans in CMBS, many market participants have extension risk on their minds. This is somewhat of a "vague" risk, as history may not be a reliable indicator of future extension risk specifically for 2004 vintage deals, analysts said.

"While we admit we are at a loss for forecasting future extensions, we think that investors, particularly those managing buy-and-hold portfolios, should at least consider the potential implications of loan extensions when determining relative value," said Merrill Lynch in a recent report. Researchers added that though they do not yet have a good feel for the extension risk in the 2004 vintage, they argue that it is greater compared to other recent vintages.

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