We have more data about commercial real estate securitization bread and butter – credit default swap index CMBX.
Last week I’ve posted about problems with series 2. Now it stands a little better:
CMBX-NA-A 2 index
But we have more news. Today the series 3 was released, here is the announcement. The problem is with pricing.
The spread of A paper increased from 49.86 to 60.64. BBB paper spread is 183 comparing with 124 for series 2, and so one. It clearly looks that the secondary market demands much more profit for the risk, comparing with levels it was happy just few weeks ago.
The proper protection of all mortgage papers with credit default swaps is mandatory, but the sharp increase in the spread is eating into profits. This is a bright yellow light on the crossroad.