NEW YORK Feb 11 Yield spreads on the
highest-rated "AAA" tier of a key derivatives index tied to
commercial mortgage loans weakened further on Monday as
investors bet on further weakness in commercial real estate.
The "AAA" CMBX-4 index widened another 10 basis points to
trade at a midpoint spread of 235 basis points in afternoon
trade on Monday, compared with its record high 224 basis points
close on Friday, according to market sources.
The index, tied to bonds backed by office buildings, hotels
and retail stores, is used by investors to hedge against
commercial mortgage risks. The "AAA" slice ended the prior week
90 basis points wider as analysts ramped up warnings of
increased downgrades and losses, especially if the U.S. economy
falls into a recession.
Hedge funds have been betting against, or shorting, the
CMBX indexes since October, investors said. Some have simply
switched positions from the ABX indexes benchmarked off of
subprime mortgage bonds that, because of their year-long drop,
have become more expensive and riskier to short, they said.
Last week, Fitch Ratings said deliquencies in
collateralized debt obligations backed by commercial real
estate crept higher.
Most analysts at rating companies and investment banks
agree that commercial property defaults will rise but not match
the debacle seen in subprime home loans.
(Reporting by Nancy Leinfuss and Albert Yoon; Editing by