Front pay, AAA CMBS backed by well-underwritten loans trading at premium dollar prices offer attractive relative value for investors. Spreads on these bonds reflect higher default prepayment risk than is appropriate given the lower default risk of better quality loans. Also, investors can improve credit quality without giving up spread by buying high premium, locked out, longer average life, AAA CMBS which do not have default prepay risk. Some of these currently trade as wide as 56 bps about the same as single A CMBS.
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