The fixed-rate CMBS pipeline has been on a month-long hiatus, drawing spreads three to four basis points tighter over the last few weeks to settle near their 2004 spread averages. For 10-year triple-As the average is in the 28 to 30 basis point range over swaps and for five-year triple-As the average is 31 basis points over. The sector is expected to hold in this range in the near term, but can be considered rich to other sectors on short-term measures.

Based on IFR data, 10-year triple-A spreads are trading rich to swaps and Treasurys as measured with a three-month z-score of -1.7 and -2.0, respectively. On a one-year basis, CMBS is neutral to Treasurys and.5 to swaps. Compared to other sectors in a three-month time frame, CMBS is rich to credit cards ABS (-2.0), home equity ABS (-1.3), current coupon mortgages (-1.2) and agency debentures (-0.7), while is neutral/cheap to single-A rated industrial corporates (0.18).

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