Concern over the fates of J.C. Penney and Sears Corp. has yet to blow out the spreads of commercial mortgage backed securities (CMBS) with exposure to the department store chains, but in light of their potential bankruptcies investors best be aware of the weakest links.

Spreads on bonds with exposure to J.C. Penney and at the bottom of the CMBS capital stack widened 10 or 15 basis points in the first few weeks of October, when the retailer’s stock price fell to a 13-year low and unsubstantiated tweets suggested it was moving closer to bankruptcy. The market quickly overcame its jitters and spreads have tightened since then, said Alan Todd, U.S. CMBS strategis at BofA Merrill Lynch Global Research. News pertaining to Sears Corp., such as the second quarter’s earnings and revenue shortfalls, has had a similar short-term impact on relevant CMBS.

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