In March, CMBS private-label pricing volume was $6.0 billion across five conduits: two single borrowers, one liquidating trust securitization and a commercial real estate (CRE) multi-borrower securitization, according to Kroll Bond Rating Agency (KBRA). For the first quarter, CMBS pricing volume ended at $11.5 billion, a 34% decrease year over year.
"Based on transactions that we are either engaged on, under a preliminary review, or reflecting conversations that we’ve had with market participants, we expect to see approximately a dozen conduits launched into early June," the firm says in its March Trend Watch report.
"In addition, there are quite a few single borrower transactions in the preliminary pipeline, as well as CRE CLOs and large loan floating rate transactions. Of course, a number of these may not come to fruition, and we expect things to evolve as it is early in the second quarter."
The first conduit that priced this month was a Goldman Sachs securitization (GSMS 2017-GS5), which was well received by the market. The AAA last cash flow (LCF) spreads for the deal came in at Swaps (S)+88, matching the tightest spreads of the year, according to the firm.
The market drifted wider as the month went on, eventually ending the month at S+98. Part of the widening could be attributed to the fall in the ten-year treasury yield during the month with investors requiring compensating spreads.
KBRA published pre-sales for seven deals ($5.7 billion) during the month of March, including four conduits ($4.2 billion), one single borrower ($218.6 million), one CRE CLO ($567.4 million) and one CRE multi-borrower securitization ($758.8 million). There were 337 surveillance actions this month, including 327 affirmations, eight upgrades and two downgrades.
The three-month rolling average KLTV increased for the second consecutive month to 100.4% in March from 99.6% in February. With the end of the first quarter, there has been a drop in our barbell indicator to 12.0% from 14.7% in Q4 2016. However, despite the indicator moving lower, high-leverage loans are contributing to approximately three-fourths of the indicator, which is an influencing factor in KLTV’s upward momentum.
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