NationsBanc Montgomery Securities CMBS Index Rises 0.51% Amid Investment Grade Sectors Laggung Behind Non-Investment Grade Sector

Strategic Insights -

The NationsBanc Montgomery Securities LLC commercial mortgage-backed securities (CMBS) index rose by 0.51% to 119.1, outperforming comparable Treasuries by 14 basis points, while the investment grade sector lagged behind the non-investment grade sector. The non-investment grade sector rose by 0.61% to 120.0, producing an excess return of 8 basis points. In comparison, the benchmark five- and ten-year on-the-run Treasury notes produced weekly total returns of 0.22% and 0.30%, respectively.

Key Takeaways:

  • The NationsBanc Montgomery Securities LLC CMBS Index rose by 0.51% to 119.1, with the non-investment grade sector outperforming the investment grade sector.
  • The non-investment grade sector rose by 0.61% to 120.0, producing an excess return of 8 basis points, compared to the investment grade sector which rose by 0.44%.
  • The benchmark five- and ten-year on-the-run Treasury notes produced weekly total returns of 0.22% and 0.30%, respectively.
  • Among rating sectors, the B rated sector performed best, rising by 0.75% and producing 17 basis points of excess return.
  • The mixed sector performed best among property sectors, rising by 0.42% with excess return of 16 basis points.
  • Fusion deals (combining smaller loans with loans in excess of $50 million) outperformed other security types, climbing by 0.59% with 10 basis points of excess return.
  • The NationsBanc Montgomery Securities LLC CMBS Index includes classes with AAA, AA, A, BBB, BB, and B ratings, and mixed-collateral, apartment, retail, office, hotel, and other property types.
  • The index also includes conduit, fusion, multifamily, large loan, single-borrower, and other security types.

Statistics:

  • The CMBS Index consists of 1,363 individual classes from 238 separate CMBS, with unpaid principal balances of $98.9 billion as of May 14, 1999.
  • The non-investment grade sector rose by 0.61% to 120.0, with 8 basis points of excess return.
  • The benchmark five- and ten-year on-the-run Treasury notes produced weekly total returns of 0.22% and 0.30%, respectively.
  • The total rate of return for the CMBS Index includes price appreciation, accrued interest, and adjustment for premium or discount, expressed as a percentage of the prior week's price.
  • Excess return is the difference between the total rate of return of a CMBS class and that of an interpolated Treasury with the same modified duration.

Sources:

  • "NationsBanc Montgomery Securities LLC" press release, May 14, 1999.
  • NationsBanc Montgomery Securities LLC website, www.nationsbancmontgomery.com.
  • BankAmerica Corporation website, www.bankamerica.com.