In the firm’s May 16 report, analysts noted that generic (non-Moodys) BBBs were priced at unusually wide concession to JPM’s index of 20 REIT bonds. Since last December, analysts have viewed the cheapness of BBB CMBS to REIT paper as a “confirming signal” for down-in-quality trades and more recently as a profitable cross sector trade idea in its own right. The latest BBB spread tightening coupled with wider REIT spreads suggests that many long BBB/short REIT bond positions have earned 10 bps on each “leg” (for a total of 20 bps) since May 16. 

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