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CMBS spreads widen as delinquencies drop


August commercial mortgage-backed securities (CMBS) spreads widened as increasing economic concerns accelerated market volatility. Spreads represent differences between two related prices, such as London interbank offered rate (LIBOR) to fixed-rate swaps or Treasury rates to swap rates, which help in determining a yield premium. Wider spreads represent higher yields but greater risk as well. Robert Noeldechen, principal with Ahern Partners, Greenwich, CT, said weaker economic news creates uncertainty and, mathematically, could decrease issuance from original projections. However, he forecast spreads to flatten out by the fourth quarter. Spread widening also affected 2010 and 2011 vintages, known as CMBS 2.0. AAA spreads widened by 35 basis points to 45 basis points as BBB widened nearly three times AAA spreads, Trepp LLC reported.

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