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CMBS Market Evolution and Emerging Risks

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Listed:
  • Xudong An
  • Lawrence R. Cordell
  • Nicholas Smith

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.

Suggested Citation

  • Xudong An & Lawrence R. Cordell & Nicholas Smith, 2023. "CMBS Market Evolution and Emerging Risks," Working Papers 23-27, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:97332
    DOI: 10.21799/frbp.wp.2023.27
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    References listed on IDEAS

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    More about this item

    Keywords

    Commercial Mortgage-Backed Securities (CMBS); Single-Asset; Single-Borrower (SASB); Conduit; Bond Return; Deal;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G50 - Financial Economics - - Household Finance - - - General

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