Working Paper

CMBS Market Evolution and Emerging Risks

Abstract: We study the evolution of the private-label CMBS market from one dominated by broadly diversified long-term, fixed-rate conduit securitizations to one dominated in 2021–22 by undiversified short-term, floating-rate Single-Asset, Single-Borrower (SASB) securitizations. Twenty-five years of stable bond returns and exceptionally low losses help explain the growth and standardization of the SASB market following the Global Financial Crisis. Historically low interest rates and pandemic-era dislocations help explain the recent dominance of short-term, floating-rate SASBs. Factors contributing to their strong performance have weakened considerably recently, exposing them to emerging risks, making their recent dominance unsustainable.

Keywords: Commercial Mortgage-Backed Securities (CMBS); Single-Asset; Single-Borrower (SASB); Conduit; Bond Return; Deal;

JEL Classification: D12; D63; G21; G50;

https://doi.org/10.21799/frbp.wp.2023.27

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2023-11-20

Number: 23-27