The Japanese crisis had the most impact on CMBS secondary market activity versus all other securitization sectors tracked by capital markets data provider Epirasign Strategies.
“I think in terms of standard deviation away from the mean, the most action has been seen in CMBS,” Adam Murphy, president of Empirasign said. “The story that's being pushed is Japan.”
Although generally prices have been weaker, in CMBS there has been a dramatic change in the “did not trade” (DNT) percent to around 40% from around 10% to 20% on both Tuesday and Wednesday this week, Murphy said. There has been a surge of lists out for bid, with sellers only getting their reserve price about half the time.
In terms of ABS, Murphy said that on Monday and Wednesday of this week there was a high percent of DNT's, although the spike in volume was not as dramatic as in CMBS, which volume spike was met with an equally impressive spike in DNT's.
To view Epirasign’s data on total sales for the last 20 days, please click this link.
ABS Secondary Color
The secondary consumer market ABS has stayed comparatively stable even given the continued Middle East turmoil and the Japanese catastrophe, according to ABS analysts.
Although most ABS products have experienced slight spread widening, Barclays Capital analysts said that price performance versus other securitized sectors has been strong.
They added that the biggest risk that they see is that the increased volatility in the broader markets could cause investors to sell their most liquid holdings, which usually means consumer ABS.
Any such liquidity-driven selling could result in near-term consumer ABS spreads widening, which will be purely based on technical reasons, Barclays researchers said.
Meanwhile, Bank of America Merrill Lynch analysts echoed Barclays' views by saying that the ABS market's “shelter from the storm” status was seen once again with spreads across the sector drifting only modestly wider.
They have maintained their overweight ABS recommendation. Within ABS, they said that the most affected asset class by the broader macro events was private student loans, which moved roughly 25 basis points wider to 250 basis points over Libor. Analysts suggested adding exposure on this weakness.