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CRE Finance World, Summer 2012

CMBS Opportunities Still Exist, Despite the Rally 2007 Dupers Still Offer Attractive Pickups to 2007-vintage dupers also offer very compelling pickups of Corporates and Cards 75–115bp to single-A and triple-B five-year credit card ABS. This year’s dramatic CMBS rally has not eliminated the pickups Dupers historically traded inside of comparable-maturity single-A to competing markets including corporates and credit card ABS. and triple-B cards. The differential versus triple-B cards turned 2007-vintage dupers are trading roughly in line with 3- to 7-year negative in early 2011, but subsequently widened out considerably. triple-B corporates, but still pick up 58bp to 3- to 7-year single-A The differentials are tighter than they were in late-2011, but remain corporates. Both single-A and triple-B corporates have historically quite attractive. Dupers have been trading wide of lower-rated cards for traded wide of comparable maturity legacy dupers. These differentials quite a while now, so we don’t expect full reversion to the historical gradually tightened throughout 2010 and the differential versus relationships any time soon, but the current wide differentials do triple-B corporates has intermittently turned negative since early indicate some longer-term tightening potential. 2011. But the consistently wide pickup versus single-A corporates indicates good relative value and some longer term tightening Figure 5 2007 Duper and GG10 Spreads Versus Credit Card Spreads, Jul 09–Apr 12 potential. Figure 4 2007 Duper and GG10 Spreads Versus Corporate Spreads, Jul 09–Apr 12 Source: Citi Investment Research and Analysis Source: Citi Investment Research and Analysis CRE Finance World Summer 2012 46


CRE Finance World, Summer 2012
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