NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) released this month’s CMBS Trend Watch today. In the October edition of Trend Watch, we note that $6.1 billion of private-label issuance priced, bringing the year-to-date total to $51.5 billion, down 37.6% year-over-year.
AAA spreads didn’t snap back in October after widening to S+ 117 bps in September, as the three conduits that priced this month settled at S+ 115 to +120 bps. BBB’s fared similarly, but were inside of September’s wide of S+ 630 bps. Thus far during November, two conduits have launched, and we are aware of 10 more that are slated to announce by early December. Despite this, recent spreads came in as investors bought up paper in anticipation of expected low supply after November and early next year.
On the ratings front, KBRA published presales for 10 deals ($6.7 billion) over the course of the month. The activity included three conduits, one single-asset single-borrower (SASB) securitization, a Freddie K-Series transaction, as well as four single family rentals and a small balance commercial deal. The surveillance activity consisted of 24 transaction reviews that resulted in 236 ratings actions, including three upgrades.
In our KBRA credit metrics discussion, we highlight an increase in leverage, which comes on the heels of multi-year lows for the KLTV metric in 3Q 2016. While we expect leverage for many of this year’s remaining deals to remain above 3Q levels, we noticed a decline in our “credit barbell” indicator. Unfortunately, much of the improvement was due to a reduction in the percentage of low leverage loans with KLTVs below 70%, which is materially higher than the reduction in higher leverage loans with KTLVs in excess of 120%.
With the October edition of Trend Watch we have also included our KBRA Comparative Analytic Tool (KCAT). The file enables users to compare data points from all KBRA rated conduits.
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