The CMBS market is gearing up for the heaviest issuance month on record, with February production now seen surpassing the previous monthly record from December 2006 and approaching almost $40 billion in fixed rate issuance. First quarter totals are expected to exceed $50 billion and yet January has produced only the one deal totaling $1.55 billion. The Morgan Stanley Capital 07-TOP25 deal ($1.55 billion) that priced last week gave a glimpse into further tightening on the longer triple-Bs and triple-A super senior classes.

For example, the triple-A 10-year benchmark class priced at 22 basis points over swaps, 2.5 basis points better than the last conduit deal to price in mid-December. The sponsorship remains strong and that loyalty will get a stern test next month. Moves inside of 20 basis points over swaps are being watched closely as heavy supply and opportunistic fast money selling at the tight end of ranges present formidable barriers.

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