Advocates trades within CMBS that allow investors to take advantage of mispriced CMBS optionality via first-pay premium AAA classes or new-issue PAC IO and seasoned WAC IO. Even with the 5 bps tightening in FNMA 10/9.5 DUS, 10Y AAA CMBS still remain rich on a one-year historical basis, but by much less at -0.8 standard deviations vs. the prior week when the reading was -1.7. But 10/9.5 FNMA DUS are trading relatively rich to 10Y agency benchmarks (-1.2 standard deviations on a 1Y basis), although they still offer a 20 bps pickup (versus a 1Y average of 25 bps).

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