CMBS is taking a beating - AJs being quoted in spreads yesterday are being quoted in prices today. 06/07 AJ are off about 3 pts on the week, most of it today. There does seem to be a little bounce back here at the end of the day, but not clear if it will last.
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Does it come as a surprise that CMBS AAA ratings were as worthless as RMBS ratings? It doesn't take a lot of 70 /30 hope note mods to turn an AJ into an IO. Of course, all sell-side model predict losses which impair AJs only slightly if at all; they also just happen to be long bonds. Morale of this story: diversity-based models do not work, and if you use one, you will probably blow up.
Does this mean I won't be able to continue filling up the bubble with air? Was fun for the 9 months or so that it lasted, but we seem to have gotten back to 2007 much too quickly, with "value add" projects trading at core like prices despite 50-75% of leases rolling over in the first three years (and nice rent growth assumed to produce that sweet underwritten 15-20% IRR). From the operator side, its actually nice to think that pricing will come back down to a level that will enable someone to buy and not have to smoke crack when doing the assumptions, but the exits will be an issue.
with Cantor making CRE loans, no they won't!
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