Commercial MBS trading in the secondary market picked up sharply this week, as many investors sought to free up cash so they could bid on a wave of fresh paper.
More than $1 billion of bonds were put up for grabs on Monday and Tuesday alone, prompting dealers to speculate that the week’s bid-list volume might exceed $1.8 billion. That would mark a big jump from about $800 million last week and the recent average of roughly $1.2 billion per week, dealers said.
This week’s offerings consisted largely of long-term, super-senior bonds from the benchmark classes of multi-borrower transactions floated in 2006 and 2007. "The trading volume has definitely been elevated with a lot of short-duration paper that [typically] doesn’t move a lot," said one CMBS trader.
Several bid lists had aggregate balances topping $200 million each. The sellers were mostly insurers, asset managers and other buy-and-hold investors, who were expected to sink the proceeds into long-term, higher-yielding bonds from a flood of new issues. Just over $9 billion of CMBS offerings were priced or marketed this week, including $5.6 billion of conduit transactions.
"The ‘real money’ accounts are repositioning themselves and gravitating towards new issues," another trader said. Buysiders saw an opportunity to shift from bonds that are due to mature in two or three years into fresh, long-term paper carrying higher yields. And while new-issue volume is heavy right now, the annual total still isn’t keeping up with the runoff among transactions that priced in the go-go years before the crash, another trader noted.
Most of the offered bonds in the bid-list auctions conducted during the first half of the week did change hands. Word has it that Wall Street dealers submitted the winning bids on a healthy amount of that paper, in keeping with their role as CMBS market makers. There was little movement in benchmark spreads, which was about 60-80 bp over swaps, depending on collateral quality and the securities’ remaining terms.
More than $1 billion of bonds were put up for grabs on Monday and Tuesday alone, prompting dealers to speculate that the week’s bid-list volume might exceed $1.8 billion. That would mark a big jump from about $800 million last week and the recent average of roughly $1.2 billion per week, dealers said.
This week’s offerings consisted largely of long-term, super-senior bonds from the benchmark classes of multi-borrower transactions floated in 2006 and 2007. "The trading volume has definitely been elevated with a lot of short-duration paper that [typically] doesn’t move a lot," said one CMBS trader.
Several bid lists had aggregate balances topping $200 million each. The sellers were mostly insurers, asset managers and other buy-and-hold investors, who were expected to sink the proceeds into long-term, higher-yielding bonds from a flood of new issues. Just over $9 billion of CMBS offerings were priced or marketed this week, including $5.6 billion of conduit transactions.
"The ‘real money’ accounts are repositioning themselves and gravitating towards new issues," another trader said. Buysiders saw an opportunity to shift from bonds that are due to mature in two or three years into fresh, long-term paper carrying higher yields. And while new-issue volume is heavy right now, the annual total still isn’t keeping up with the runoff among transactions that priced in the go-go years before the crash, another trader noted.
Most of the offered bonds in the bid-list auctions conducted during the first half of the week did change hands. Word has it that Wall Street dealers submitted the winning bids on a healthy amount of that paper, in keeping with their role as CMBS market makers. There was little movement in benchmark spreads, which was about 60-80 bp over swaps, depending on collateral quality and the securities’ remaining terms.
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