The CMBS market has been in high demand in 2005 with the triple-A 10-year sector tightening five basis points since the end of last year on a swaps basis and eight basis points versus Treasurys. This has the sector trading close to fair value versus competing sectors while still offering some attractive value.

The CMBS credit curve is steeper versus its 12-month averages, led last week by the double-A sector. The spread over triple-As tightened two basis points to five basis points versus a 12-month average of seven basis points. The triple-B spread versus triple-As also tightened two basis points, though remains three basis points cheap to 12-month averages. Single-As look to be the cheapest area of the curve, with triple-Bs running right behind.

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