they move this stock now on an intraday basis top to bottom 40%.
Until the day traders disappear, or some bit of news comes out to get rid of them, they will continue to move it daily for pennies (but large percentages). Unbelievable
That's just the beginning. The chart from MARKIT was from Wednesday pointing to further deteriation down the road. It's a matter of time until more commercial real estate mortgage loans fail; just a matter of time. God help us.
It's like you are playing the game after it's already over. The market already reliquified last week. Those charts are all old news. You had 2 shopping centers go into default 2 weeks ago in the west. That it.
Crash on Triple AAA CMBS
The CMBS crashThe graphs really say it all.
From Markit, below, are a selection of graphs showing the performance of the CMBX index. The CMBX in an index of CDS written against commercial mortgage-backed bonds. Thus the higher the spread on the CMBS, the lower the implied value of the underlying bonds.
As you can see, CMBS have plummeted across the board.
Note also that some of the steepest declines have been for the triple-A rated tranches. All correlations go to 1, etc. etc.
The proximate cause of the pain was the disclosure last week that the TARP would no longer be used to buy up illiquid securities from the banks. CMBS being foremost among those securities eligible.
As Across the Curve observes:
Meltdown. That is the word that one market participant used to describe the action in the CMBS market today…
Quoth the Buffalo Springfield circa 1966,” Something’s happening here and what it aint exactly clear”. It feels as though the bond markets are setting up for another patch of very rough weather.
Of course, for the banks, this now raises the distinct possibility of some severe writedowns (worth reading: exposure of UK banks to CMBS).
One final question: is this crash driven by technical factors and therefore, potentially, overplayed? Possibly, but it’s worth observing what has happened to the sister index of the CMBX, the ABX, (which tracks implied prices on subprime mortgage-backed bonds.) The ABX has never recovered from its lows. It has just drifted lower. The news about the economy has worsened, and delinquencies on subprime mortgages have continued to tick higher.
The WSJ notes the rising number of commercial mortgage delinquencies.
…defaults on commercial mortgages are starting to rise. According to a Citigroup Inc. report, the overall number of commercial mortgages packaged into securities that are 30 days or more past due rose to 0.64% in October from 0.39% at the end of last year, with most of the increase coming in October. The latest figure, though low by historic standards, marked the highest delinquency rate in two years.
Now Commercial-mortgage-backed securities are different fish to residential-backed bonds: the pools are far less granular. Which goes some way to explaining those apparently low delinquency rates. With CMBS, when trouble does hit, it is much more sudden and sharp. The delinquency rate might not be expected to smoothly move higher, it should jump. And it will do so when the real pain begins to bite in the economy.
But from just a glance at the major metropolitan areas right now it should be clear the outlook for commercial property is not good. Overvalued and oversupplied.
Old news last month.....of course there is going to be downward pressure on CMBS. But that pressure is on the equity and non-investment grade tranches. Not AAA and AA. There's a lot of cash supporting these deals. And. if you are really worried, with 73 Billion in assets and ~3 bilion in AAA-AA rated CMBS, it's hard to make a case that GNW will have a "cash" event on its hands. If those deals go bad, that means, you, I, and everyone is living life not as we know it but instead in tents.
US CMBS Delinquencies Edge Higher In October - Fitch
Monday November 17th, 2008 / 19h44
DOW JONES NEWSWIRES Fitch Ratings said delinquencies of U.S. commercial mortgage-backed securities rose in October, citing an uptick in nonperforming matured loans, and projected further increases by the end of the year.
The delinquency rate edged up to 0.51% from 0.45% in September.
"With CMBS issuance at a standstill and portfolio lenders cautiously managing their balance sheets, borrowers are facing increased difficulty accessing capital to refinance maturing loans," Fitch Managing Director Susan Merrick said. "Given the illiquidity in the market, we expect the proportion and dollar balance of maturity defaults to continue to grow at a fast pace."
For the month, nonperforming matured loans made up 42% of new delinquencies and 15% of the overall index, up drastically from 16% of new delinquencies and 4% of the overall index in the same month last year.
Fitch SMARTView: 40 U.S. CMBS Deals Placed 'Under Analysis'
Last update: 2:11 p.m. EST Nov. 26, 2008
NEW YORK, Nov 26, 2008 (BUSINESS WIRE) -- Fitch Ratings has placed 40 of its U.S. CMBS deals 'Under Analysis', indicating that Fitch will be issuing a rating action within 30 days. SMARTView is Fitch's ongoing monthly surveillance process, with the 'Under Analysis' designation given to those deals which Fitch plans to further analyze over the next month. Of the 477 Fitch rated U.S. CMBS transactions, 437 U.S. CMBS deals were designated with a SMARTView date of Nov. 26, 2008, indicating that no in depth review is necessary.
As Fitch receives monthly information on structured finance transactions from trustees and servicers, Fitch analysts run the data through various internal algorithms that identify classes of a transaction as possible candidates for upgrade or downgrade. Fitch's analysts scrutinize the output to decide which deals need an in depth review, which are classified as 'under analysis', and those deals with no significant changes, which can be given a SMARTView date.
Six of the 40 transactions were designated as 'Under Analysis' to provide updated commentary to the market, as Fitch aims to perform an in-depth review on each transaction annually
Moody's Investors Service expects U.S. commercial mortgage-backed securities' ratings to face downward pressure in coming months as falling demand cuts rents and boosts vacancies in the U.S. commercial real estate market.
The ratings agency said it was concerned about CMBS from 2006 through 2008, particularly fixed-rate deals with concentrations of pro forma loans, or loans that were underwritten assuming continued strong economic growth.
It said the pressure is spread across all markets and property types, adding that the retail, hotel, multifamily and industrial markets are seeing stronger headwinds.
Moody's said the fact that commercial real estate entered the downturn with little excess supply and that only a small portion of the loans backing CMBS face refinancing in 2009 could mitigate the pressure on ratings.
Moody's expects commercial property values to fall 20% to 30% from their peak late last year and sees the market reaching a bottom in 2010 to 2011. It expects defaults to increase several times over during the next few quarters.
Rival ratings agency Fitch Ratings said last week that delinquencies of U.S. CMBS rose in October, citing an uptick in nonperforming matured loans, and projected further increases by the end of the year. And last week, Standard & Poor's Ratings Services said that despite a steady rise in delinquencies over the first three quarters of the year, the rate among commercial mortgage-backed securities "remained low" at the end of the third quarter, at 0.56%.