One week after the Warburg Dillon Read/Lehman Brothers Inc. $1.4 billion conduit deal was shelved, commercial mortgage-backed securities players seemed to come back to life last week, with spreads tightening on both five-year and ten-year paper.

"People are coming out of the woodwork," said Gail Lee, director of CMBS research at Credit Suisse First Boston. "The reason for that deal being pulled doesn't affect the way some of the other vintage issues will trade. The market was waiting for that deal to happen. When it didn't occur, people who were sitting on the sidelines while things are getting cheaper and cheaper now think this is a good time to get in new deal or not. You could point to some of the secondary market as taking the lead in re-establishing a market again."

On the week, five-year triple-A's were eight basis points wider while ten-year triple-A's were five wider.

"Now that the Lehman deal is pushed back, April is a very light month," said Michael Youngblood, managing director of real estate at Banc of America Securities. "The absence of any supply pressure will give investors greater confidence in this section of the market."

Several factors have impacted CMBS during the first quarter, the analysts said. Firstly, the problems that have gone on with the GSEs (the Gensler speech) and home-equity loan sectors (predatory lending) recently have worked to the benefit of CMBS and prime non-agency securities, in that issuers for CMBS are not vulnerable to the kind of corporate events that beset a company such as Conseco, for instance. Secondly, with the creation of the public real estate markets, the landscape of refinancing and the way people look at relative value has changed.

"Insurance companies have evolved," Lee said. "They now get more exposure to commercial real estate on the debt side, through CMBS and whole loans. Now, CMBS desks are talking to real estate people who are whole-loan originators. This has impacted how we traditionally come up with CMBS projections."

According to Lee, total CMBS issuance is already running between 35% and 40% behind last year's levels. Additionally, only five fixed-rate conduit deals, totaling $4.2 billion, have been issued so far this year.

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